An unprecedent wave of fraud is engulfing the United Kingdom.


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Scams offering energy-savings grants skyrocketed by 85 percent in the last month alone, and according to the fraud prevention service Cifas, fraud schemes around asset finance products have increased 162 percent in the first nine months of 2022 compared to last year.

At a time when effective, efficient, and prevalent policing and regulation of fraud is desperately needed, the new U.K. government is pursuing policy that would see HM Treasury potentially granted authority to intervene with or overrule key regulators, including the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).

This has elicited concern from senior figures, including FCA Interim Chair Richard Lloyd, who warned the U.K.’s international reputation as a financial services leader is in peril.

To do their jobs properly, regulators must be able to act independently and without government intervention. Rather than seeking to tighten its grip on regulators, the U.K. government should be safeguarding their independence as a matter of urgent priority as we continue to do battle with the ever-growing scourge of fraudsters and scammers.

Thinking long term

The British political climate of the past few months has brought into sharp focus why it is vital regulators remain able to operate independently of the government. If there is to be built a proper, lasting resilience against fraud in the United Kingdom, we must have a long-term strategy underpinned by a consistent and unwavering approach to regulating the financial services industry. For this to succeed, regulators must not be exposed to the sort of political turbulence witnessed in the country over the past year.

As demonstrated by the recent exchange of power in the roles of both the British chancellor and prime minister—and the new chancellor’s subsequent reversals of nearly all the policies announced in the ill-fated “mini-budget”—the government’s priorities, directions, and approach are liable to swing and change drastically in tandem with changes of personnel, government, or political party.

These changes have immediate consequences on policy and the markets, and the FCA and PRA must be able to work freely, with the sole purpose of protecting the consumer. If HM Treasury can intervene on regulators’ agendas or plans, then the regulatory regime risks becoming stifled by political instability. If a regulatory package can be signed off by one government, only to be completely reversed within weeks by another, fraudsters will run rampant with no long-term regulatory framework to stop them.

To prevent this, regulators must remain unbound to short- or medium-term political fluctuations. Consumer confidence and safety is, to a large degree, dependent on regulators being a steady ship in the face of governmental volatility. If the FCA and PRA are made political pawns by the proposed deregulatory package, this will jeopardize their long-term goal of protecting financial service consumers.

HM Treasury’s stated aim of deregulating the market is to create the strongest place for financial service businesses to operate in the world. However, enhancing the government’s control over regulators as part of this plan could result in the opposite outcome, as the regulatory framework could become completely shackled by political turbulence.

The importance of long-term planning and strategy for properly protecting consumers cannot be understated. Even in times of relative political stability, the regulatory agenda would be constantly changing as power is handed from one government to the next because of the nature of the U.K.’s democratic political system.

Independence in action

We recently saw clear evidence of why it is crucial regulators remain independent of government direction and policy. This was demonstrated by the Bank of England’s intervention following the mini-budget.

With the market facing a series of its most volatile days in history, the Bank of England’s quick decision-making and rapid deployment of 65 billion pounds (U.S. $77 billion) for damage control proved vital in restabilizing the U.K. economy.

These important, quick-response moves might have been impossible if it were not for the Bank of England’s ability to act with independence from government mandate. If the government had the authority to dictate or heavily influence the Bank of England’s decisions or responses, these actions might have been delayed or even blocked entirely. As a result, the economy would have continued to endure panic and turbulence, and consumers would have suffered to an even greater extent.

The proposals in the Financial Services and Markets Bill could potentially grant the government these powers over regulators, hindering their ability to respond to the needs of the markets.

Effective cooperation between the government and independent regulators is undoubtably an important aspect of setting a robust regulatory framework. However, regulators must be able to act and respond with the same nimble autonomy as the Bank of England did.

Moreover, for London to remain competitive and at the forefront of the field, regulators must also be able illustrate they are operating only in the interest of the consumer when setting their long-term agendas.

Safeguarding civil procedure

Currently, only a fraction of reports of fraud are elevated to criminal proceedings. The House of Commons Justice Committee recently estimated of the 4.6 million cases of fraud reported each year in the United Kingdom, only 0.16 percent are prosecuted.

Meanwhile, just 2 percent of U.K. police funding is allocated to combating fraud. It is therefore pivotal to maintain a strong and effective civil enforcement system, as it is essentially all that remains shielding consumers from fraudsters.

Fraud schemes in the post-pandemic digital age are increasingly sophisticated. In the run up to Christmas, Barclays issued a blanket warning to shoppers to be particularly wary of online purchase scams, which the bank reports have risen by 70 percent year-on-year.

Consumers, the bank said, should pay attention to their gut feeling. While sound advice, it is not good enough to expect the public to be able to intuitively detect scammers.

Fraud of this nature requires a dedicated and specialized response led by properly functioning regulators and underpinned by a robust and equally sophisticated regulatory framework. The FCA, PRA, and other regulators must be able to exercise their expert resources without being hindered by government influence.

Pursuing an agenda of deregulation could see U.K. consumers left at the mercy of criminals, with minimal or no enforcement on fraudsters allowing them to operate with little fear or accountability.

Lingering questions

Although the exact nature of powers that could be granted to the government are not yet known, Lloyd’s concerns that the “perception of the erosion” of regulators’ independence “will happen very rapidly” strikes at one of the major issues of the U.K. government’s current course. The United Kingdom is gambling with its reputation on the world stage, and the government is risking consumer confidence in the financial services market.

The U.K. government must take proactive action to assure regulators, the public, and the world the country’s financial regulators will not become politicized.

It is no secret U.K. regulators have been struggling with their own internal issues that have hindered their ability to prosecute fraud, so there are certainly potential benefits in streamlining regulation. However, any process pursuing this goal must avoid infringing on regulators’ independence. Further, it appears the extended reach of government influence is merely proving yet another headache for regulators who are already trying to tackle their deficiencies.

When it comes to maintaining the U.K.’s leading reputation for financial services, the government would be wise to let sleeping watchdogs lie.

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