No binary options or warehouse brokerage scams in Britain this year: Serious Fraud Office goes all out on white collar crime

Britain has a top drawer reputation as a very high quality business environment, with London, the world’s largest and most prestigious financial center being regarded as one of the top regions in which to do business this year, regardless of industry sector.

In order to preserve its standing, Britain’s authorities have now stated that they will be stepping up their intolerance of ‘white collar crime’, largely centering around fraudulent entities targeting British citizens.

London is the most vaunted and highly respected city in the world for the online trading industry. It is home to the Tier 1 interbank FX dealers, which handle 49% of all FX order flow from the plate glass towers of Canary Wharf.

HSBC, Deutsche Bank, Barclays and Citi dominate the entire global interbank FX market and technology infrastructure, whereas just less than half a mile away in Bank Street, Thomson Reuters nestles among other entities including ABN AMRO and Rabobank.

In the Square Mile, the world’s institutional non-bank liquidity and prime brokerage powerhouse shines out, and is joined by the retail giants IG Group and CMC Markets, all of whom have three decades of establishment and a loyal, enlightened largely domestic customer base which uses their proprietary technology.

The last thing Britain needs, in this case, is nefarious activity in its realms, hence the Serious Fraud Office (SFO) and the British regulatory authorities increasing their remit this year.

The Serious Fraud Office has now stated that it expects to invoke a lot more ‘deferred prosecution agreements’ (DPAs) which are voluntary alternative to adjudication in which a prosecutor agrees to grant amnesty in exchange for the defendant agreeing to fulfill certain requirements. A case of corporate fraud, for instance, might be settled by means of a deferred-prosecution agreement in which the defendant agrees to pay fines, implement corporate reforms, and fully cooperate with the investigation. Fulfillment of the specified requirements will then result in dismissal of the charges.

These are rather similar to the Enforceable Undertakings that the Australian Securities and Investments Commission (ASIC) issue firms that make minor transgressions.

The Criminal Finances Act will be brought into effect this year.

It was officially introduced into the House of Commons on October 13 2016, however its usage in British criminal law will commence this year.

The Criminal Finances Act was introduced to significantly improve the government’s ability to tackle money laundering and corruption as well as
recover the proceeds of crime, which includes fraudulent schemes offered by entities such as binary options companies and unlicensed warehouse brokerages which make their profits from the deposits of customer funds rather than providing a genuine financial markets environment.

The City of London police recently labelled binary options the “fastest-growing iteration of investment fraud”. Much of the industry operates out of Israel but is regulated in Cyprus, which allows companies to offer their services throughout Europe but largely escape oversight from domestic watchdogs.

he Financial Conduct Authority(FCA) does not regulate any of the operators, while the Gambling Commission oversees just seven that have “key equipment”, such as servers, on British soil. The average fraud claim against binary companies in Britain is more than £20,000. In September last year the FCA, City of London police and the Gambling Commission met to devise a strategy to tackle the industry. The FCA has also made it very clear that it will never regulate binary options as a financial product, largely because of the amount of fraudulent activity that these firms commit.

Within FCA regulated firms and large banks that are overseen by the Prudential Regulatory Authority, senior managers will now be held personally liable for compliance breaches within their firms, rather similarly to the system in operation in the United States.

The US Securities and Exchange Commission will also increase its focus on insider dealing and co-operation between UK, US and other overseas agencies will continue to see an ever increasing number of regulators and prosecuting agencies taking action against corporates and individuals.

London’s highly polished and sophisticated industry, along with its astute and experienced leaders in the institutional and retail sector will be able to take comfort in the knowledge that their interests will be protected by these moves and that the government will not tolerate any bad influences from outside casting a shadow over London’s gold-plated and well deserved reputation.