Abuse by Finance Firms Left Unchecked, Chancellor Reeves Warned as She’s Urged to Clean Up the City

Chancellor Rachel Reeves faces calls to beef up Britain’s financial regulator following a string of scandals in the sector.

It comes ahead of a key speech by the Chancellor to industry figures at the City of London’s opulent Mansion House this Thursday.

An open letter from finance sector figures and campaigners, led by the non-profit Transparency Task Force UK to Chancellor Reeves, identifies a significant “trust gap” in financial services that they argue is hampering the sector’s growth potential. 

According to the Financial Conduct Authority’s (FCA) research, only 11% of adults strongly trust the financial services sector, with trust levels remaining stagnant even as memories of the 2008 global financial crisis fade. 

Particularly concerning, the authors write, is the fact that young people show more distrust than older generations, while vulnerable and marginalised groups demonstrate the lowest levels of confidence in the industry. 

This lack of trust has serious economic implications, they argue, noting that consumers are hesitant to try new financial products or providers, which creates an “obvious barrier to innovation and growth.”

And the impact extends beyond individual consumers to affect pensions, investments, and small business lending, with many business owners reportedly reluctant to seek bank financing due to fear of mistreatment. 

String of Scandals

The letter points to numerous regulatory failures and financial scandals that have contributed to the collapse in trust.

These include the “exploitation of vulnerable, low-income workers by payday lenders”, the ongoing plight of so-called mortgage prisoners trapped in hugely costly mortgage deals, and the Woodford Equity Income Fund scandal – which “saw a ‘superstar’ fund manager “jeopardise prudent savers’ pensions” with the victims then being denied access to statutory protections and compensation. 

The ‘peer to peer’ lending sector has also been subject to ‘light touch’ regulation, which TT UK says came as the result of Treasury lobbying and which “allowed rogue platform operators to fleece consumers”. 

The campaigners also point to a raft of complaints of alleged mistreatment of small and medium-sized enterprises by banks. Many of these cases remain unresolved, some for over a decade. 

UK financial regulators are viewed by some in the sector as soft-touch compared to traditionally tough US watchdogs. Since 2000, finance firms have been fined just over £6bn by regulators in the UK, according to the monitoring tool Violation Tracker. In the US, a single crypto firm – Binance Holdings – was fined over half that amount (£3.4bn) last year alone.

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A recent Spotlight on Corruption report revealed a “serious accountability gap” when it comes to senior executives. “Those at the helm of large firms that engage in economic crime, financial wrongdoing or regulatory breaches rarely face any consequence at all…The organisations’ leaders seem to treat [sanctions] as just ’the cost of doing business’.” 

That’s despite a “remarkably potent and well-conceived” set of powers to tackle wrongdoing, in a certification regime set up for senior managers by Parliament in the wake of the 2008 financial crash.

Bad Actors

Andy Agathangelou FRSA, Founder of Transparency Task Force and Chair of the Secretariat Committee for the All Party Parliamentary Group on Investment Fraud and Fairer Financial Services, said in the letter: “The honest majority of financial services firms would gain immensely from the strengthened safeguards and protections promised by these measures, which can be introduced at no overall cost to the public purse. 

“A small number of bad actors would find life immeasurably more difficult; but that is to be welcomed, given the risk of the entire sector being tainted, and its prospects impaired, by their wrongdoing.”

Testimony recently given to the influential All-Party Parliamentary Group on Investment Fraud alleged that the the considerable powers Parliament has given the Financial Conduct Authority are being “systemically under-utilised.”

Multiple independent reports have concluded that financial regulation and enforcement in the UK is not fit for purpose, including a 2020 report by Dame Elizabeth Gloster into the FCA, a review of the FCA’s Handling of the Connaught Income Fund Series 1 and Connected Companies that same year, and a National Audit Office investigation into the controversial restructuring of the British Steel Pension Scheme in 2022.

Rather than calling for more regulation, Transparency Task Force advocates for “smarter regulation” that is properly enforced.

Their proposals include replacing the finance sector’s current ‘Consumer Duty’ with a more effective Duty of Care to the public, strengthening the governance and accountability of regulatory bodies, and improving the Financial Conduct Authority’s ability to learn from past failures. They argue these changes could be implemented without additional cost to the public purse.

And they say the proposed reforms would benefit legitimate financial firms while making life more difficult for bad actors. 

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In Reeves’ Inbox

The approach aligns with Labour’s goals for the sector, creating a stable policy environment, strengthening economic institutions, and supporting innovation and investment, as set out in Labour’s “Financing Growth” proposals this January. 

The authors of this week’s open letter argue that their suggestions would help restore the reputational integrity of the UK’s flagship financial sector while promoting sustainable growth.

They are requesting a meeting with the Chancellor to discuss these proposals in detail. 

The timing of the letter, just ahead of the Chancellor’s Mansion House speech, is strategic, as Labour faces pressure to deregulate the sector in a bid to hit its growth goals. She is already reported to have watered down banking reforms amid complaints from City figures.

Read the letter to Chancellor Reeves in full here.

Co-signatories in an organisational capacity:

• Andrew Mills, Director, Insight Financial Research
• Andy Agathangelou, Founder, Transparency Task Force
• Phoebe Clay, Director, Unchecked UK
• Sirjeel Zafar, Director, Planning Wise Ltd
• Sue Milton, Managing Director, SSM Governance Associates
• Geoff Egan, Director, Egan Property Asset Management Ltd
• Ian Hart, Managing Partner, Unbiased Financial Group LLP
• John Rawicz-Szczerbo, Director, Bespoke Pension Management (London) LLP
• Neil Mitchell, Chairman and CEO, Banks Claims Group Ltd
• Neil Taylor, Chair, Wellesley Investor Action Group
• Professor Nigel Harper, Chairman, Ethical Banking Standards Council
• Paul Weir, Chair, Equitable Members Action Group
• William Price, CEO, D3P Global

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Justice Delayed

In one complaint recently taken forward by Transparency Taskforce, it was left to the Advertising Standards Authority (ASA) to rule against CurrencyWave, a Leeds-based firm accused of misleadingly claiming they were regulated by the FCA, while marketing themselves as providing “direct online access to the wholesale currency market”.  

Transparency Task Force claims the FCA took 18 months to inform campaigners that, following a complaint, it was out of their scope to handle, or to sanction the company. 

After being passed to the advertising watchdog, the ASA noted in a ruling this month: “CurrencyWave is not regulated by the FCA in any way, nor does it provide any services of its own. Yet, it has been marketing and advertising itself as a provider of FX [Foreign Exchange] and payment services.” There was no financial sanction: the ASA told them “the ad must not appear again in the form complained about.”

The Transparency Task Force spokesperson said: “The FCA said the matter was outside of its perimeter and therefore was not its responsibility. 

“The process of reaching this point took a very frustrating 18 months during which time the misleading practices continued unabated. In March 2024, we took the matter to the ASA, with this result. The ASA found [repeated] breaches of advertising rules.” 

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