Date: 2024-05-18 Page is: DBtxt003.php txt00016676
UK ... Banking and Finance Sector
Corruption and Fraud
Prem Sikka: How UK regulators have covered up corruption and fraud. Corporate cover-ups go right to the top, writes accounting expert Professor Prem Sikka.
Peter Burgess
Why is the finance industry so mired in scandals?
The UK has had a banking scandal in every decade since 1970s, culminating in the big financial crash in 2007-08. The finance industry has also excelled at mis-selling financial products, such as mortgages, bonds and payment protection insurance; and rigging interest rates and foreign exchange rates.
People look to regulators to curb pernicious practices, but regulators are more interested in protecting corporations and elites than citizens.
The latest example of this thesis is provided by revelations this week: behind the scenes, the Bank of England (£) warned prosecutors not to bring criminal charges against Barclays Bank.
The background is that the Serious Fraud Office (SFO) had charged Barclays PLC and four individuals with conspiracy to commit fraud and the provision of unlawful financial assistance. The charges arose out of Barclays PLC’s capital-raising arrangements with Qatar Holding LLC and Challenger Universal Ltd in 2008, as well as a US$3 billion loan facility made available to the State of Qatar acting through the Ministry of Economy and Finance in November 2008. In October 2018, the High Court ruled against the SFO’s application to reinstate the criminal charges previously dismissed in the Crown Court.
The Bank of England apparently opposed criminal action on the grounds that a corporate criminal charge would present a small, but not insignificant, threat to Barclays’ safety and soundness. This begs the usual questions about the independence of the elites running the regulatory institutions and their desire to protect the industry rather than people.
A legacy of illegality
The Barclays case is not unique. The financial regulators have a habit of burying scandals and ignoring the stench of corruption. The Tomlinson Report, published in 2013, provided evidence of systemic abuse of bank customers and small businesses at Royal Bank of Scotland. The Financial Conduct Authority (FCA) did nothing.
The FCA commissioned a report into malpractices at RBS and decided not to publish because it was considered to be confidential – apparently content to deny customers any right to secure redress. The House of Commons Treasury Committee secured a copy and published the report, stating:
“The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property”.
Yet still no action from the FCA against the bank, its directors and advisers.
Massive frauds at HBOS are documented in the Project Lord Turnbull Report. The report shows that bankers enriched themselves at the expense of business clients, many of which were forced into insolvency and were stripped of their assets. The FCA has brought no action.
In this vacuum, Thames Valley Police investigated and secured criminal conviction of six bankers. Police Commissioner Anthony Stansfeld said: “I am convinced the cover-up goes right up to Cabinet level. And to the top of the City.”
Under the rug Successive UK governments have been adept at sweeping things under the carpet. The twentieth century’s biggest banking fraud occurred at the Bank of Credit and Commerce International (BCCI). It was forcibly shut-down in July 1991, but to this day there has been no independent investigation and the government concealed the identity of the miscreants. The Tax Justice Network described the BCCI case as ‘possibly the biggest banking fraud in history’: “BCCI is a story of massive-scale money laundering, bribery, blackmail, and organised crime, operating through a secrecy network involving deceit, fraud, and the brokering of power and influence around the world.” After five and half year litigation, I secured one secret report, code named the Sandstorm Report, which shows that individuals with high political links, connections with royal families in the Middle East, and intelligence services benefited from the BCCI debacle. In 2012, HSBC paid a fine of $1.9bn to US authorities for its role in money laundering by drug traffickers and governments on sanctions lists. The US Department of Justice stated that the bank “accepted responsibility for its criminal conduct and that of its employees”. Right to the top The UK did not mount any investigation in the HSBC case. Instead, then-Chancellor George Osborne secretly wrote to the US regulators and urged them to go easy. HSBC escaped criminal charges. Of course, the finance sector is not the only sector indulged by the Nelsonian habits of UK governments and regulators. For example, Prime Minister Tony Blair personally intervened to prevent investigation of bribes paid by BAE to secure sales of weapons. Such efforts were exposed by the US inquiries which resulted in fines on BAE. All these cover-ups and more embolden companies and their directors to engage in corrupt practices and pose serious questions about the rule of law, nature of democracy and people’s right to know. Little attention is paid to the plight of innocent victims of frauds and malpractices. There is little public accountability of ministers and regulators and in this vacuum corrupt practices continue to flourish. The UK regulatory apparatus has a tendency to protect big corporations and elites rather than the people. It is not fit for purpose. Prem Sikka is a Professor of Accounting at University of Sheffield, and Emeritus Professor of Accounting at University of Essex. He is a Contributing Editor for Left Foot Forward and tweets here. Like this article? Left Foot Forward relies on support from readers to sustain our progressive journalism. Can you become a supporter for £5 a month? 4 Responses to “Prem Sikka: How UK regulators have covered up corruption and fraud” Patrick Newman Yesterday No wonder the financial establishment is terrified by the prospects of a Labour victory under Corbyn with McDonnell as Chancellor who cannot be bamboozled and hoodwinked by the corrupt interests in the City. When Labour gets in power they must make it clear that prosecutions will result in incarceration for those found guilty. Furthermore, HMRC must be given the resources, including legislative powers, to pursue those avoiding and evading taxes, bearing in mind that tax avoidance is tax evasion after the law is brought up-to-date. Labour must also look at the SFO and purge the backsliders if necessary. Also, why not have a national audit service that reviews the audits of these large companies before they are published. Corrupt and incompetent auditing is a real problem. nhsgp Yesterday Meanwhile, the governments says IFRS accounting standards used for the Whole of Government Accounts. IFRS 19, employee pension schemes are on the book. 1.6 trillion pounds of Fraud there but an accounting Professor says nothing. I wonder why. 8 Trillion pounds of state pensions debt hidden off the balance sheet, ditto. Nuclear clean up, another debt, hidden off the books Guarantees for local government pensions, NHS pensions, Police, Fire etc, all hidden off the books in another accounting fraud. Not a peep. Prem Sikka: How UK regulators have covered up corruption and fraud | kickingthecat Today […] https://leftfootforward.org/2019/05/prem-sikka-how-uk-regulators-have-covered-up-corruption-and-frau… […] Tom Sacold Today We need Labour to openly have a policy to nationalise the banks and other financial institutions.
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Prem Sikka Professor Of Accounting at University of Sheffield, Emeritus Professor at University of Essex 20h Why does the UK's finance industry remain mired in scandals? One response is that the regulatory system is corrupt and very adept at cover-ups. Instead of protecting citizens from malpractices it shields corporations and miscreants. This in-built capture is destroying democracy, public accountability, rule of law and people's chances of living a good and fulfilling life. No alt text provided for this image Prem Sikka: How UK regulators have covered up corruption and fraud leftfootforward.org 15 15 Reactions on Prem Sikka’s post 15 Comments 15 Comments on Prem Sikka’s post Like Comment Share Top Comments Peter Burgess Add a comment… Images 16h Christopher Lees Christopher Lees 2nd degree connection2nd Editorial Board Member at The Trademark Lawyer Magazine Hi my dad and I have our case being heard in the High Court, Rolls Building, one of the first two weeks in July. Pop in if you get chance. It's not banking, but it'll be an eye-opener regarding VW and Bentley Motors. Like Christopher Lees’ comment · 1 Like 1 Like on Christopher Lees’ comment · 4 Replies 4 Replies on Christopher Lees’ comment Load previous replies Load previous replies on Christopher Lees’ comment 6h Prem Sikka Prem Sikka Author Professor Of Accounting at University of Sheffield, Emeritus Professor at University of Essex It is a true David v Goliath battle and you deserve justice and hope that you slay the big corporation. Like Prem Sikka’s comment · 2 Likes 2 Likes on Prem Sikka’s comment 4h Christopher Lees Christopher Lees 2nd degree connection2nd Editorial Board Member at The Trademark Lawyer Magazine It's more than that Prem. It has similarities to our receivership, but this time much easier for the public to understand - and with hard evidence. My dad said 'hi'! Like Christopher Lees’ comment 18h Nick Gould Nick Gould 2nd degree connection2nd partner at gunnercooke llp Another interpretation is that (I) the various regulators are under resourced and (ii) that the laws rules and regulations they have to work with are appallingly drafted and much too complex. While the major banks have near unlimited and other resources, the regulators ( and particularly some of those whose role is to prosecute) are almost always one or more steps behind. Although many MPs are supportive of those whose lives and businesses have been destroyed by the actions of certain corrupt bankers and their corrupt advisors, once the issue reaches either the Treasury or Ministerial level....on the whole it is like trying to swim through treacle... nearly impossible. Like Nick Gould’s comment · 1 Like 1 Like on Nick Gould’s comment · 4 Replies 4 Replies on Nick Gould’s comment 18h Prem Sikka Prem Sikka Author Professor Of Accounting at University of Sheffield, Emeritus Professor at University of Essex When exactly was the UK regulatory system gloriously honest, open and accountable. Yes, resources do matter and the laws could and should be better, but why do UK governments draft laws which have more holes than a sieve. When I looked at some of the tax laws, they were drafted by working groups colonised by big corporations and accounting firms. Just look at the UK company law. there is no central enforcer. In everyday life, you and I face 'comply or else' situations. Corporate elites have a Code of Corporate Governance based on 'comply or explain' which doe snot give any stakeholder any rights. Corporations are becoming a state within a state. Like Prem Sikka’s comment · 2 Likes 2 Likes on Prem Sikka’s comment 18h Nick Gould Nick Gould 2nd degree connection2nd partner at gunnercooke llp Prem Sikka Did I say it was 'gloriously honest open and accountable'??? I'm chairman of #SMEAlliance . I've seen the crap dumped on bank victims and the effect of impotent regulators. I've seen people sick and dispossessed and dying. Ok. Like Nick Gould’s comment 18h Prem Sikka Prem Sikka Author Professor Of Accounting at University of Sheffield, Emeritus Professor at University of Essex No Nick, you did not say that and please accept my humble and sincere apologies if my words came across in any unintended or wrong matter. You are absolutely right about the crap dumped on SMEs and I will be meeting Police Commissioner Anthony Stansfeld next week to hear more about corruption in the finance industry, which has also publicly stated. Like Prem Sikka’s comment · 3 Likes 3 Likes on Prem Sikka’s comment 17h Nick Gould Nick Gould 2nd degree connection2nd partner at gunnercooke llp Prem SikkaThanks ..best wishes Nick Prem Sikka: How UK regulators have covered up corruption and fraud Prem Sikka Yesterday Corporate cover-ups go right to the top, writes accounting expert Professor Prem Sikka. Prem Sikka