Thursday, 26 July 2012
£471,846 FSA fine and ban for individual UK broker due to fraud
A former UK commercial insurance broker was this week banned and fined £471,846, one of the largest amounts ever levied on an individual for insurance fraud, by the Financial Services Authority (FSA) for using clients’ insurance premiums to fund his business.
Stephen Goodwin, a former partner of Goodwin Best in Bury, Lancashire, has been prohibited from working in regulated financial services. His fine consists of the disgorgement of benefit of £303,846 and an additional £168,000 punitive element.
Between 2008 and 2010 Mr Goodwin, and his now deceased business partner, accepted insurance premiums from clients but sometimes paid this money into their business account rather than to the relevant insurer or intermediary to arrange the policy.
In total, Goodwin and his business partner misappropriated £303,846. Because of these actions at least three clients suffered financial loss.
One tried to make a claim only to find they were uninsured and two other clients paid the same premium twice to ensure their policies remained in force.
The clients are now in contact with the Financial Services Compensation Scheme.
Mr Goodwin was declared bankrupt in April 2011 in relation to debts incurred by his firm and his bankruptcy was discharged in April 2012. The firm Goodwin Best is no longer operating.
Tracey McDermott, the FSA’s acting Director of Enforcement and Financial Crime, said: "This is a significant fine to reflect serious failings. Goodwin knowingly diverted money intended to pay for contracts of insurance into his own business to keep it afloat. Although the diversion of premiums did not lead to the majority of clients being left uninsured, this does not detract from the seriousness of the misconduct. These are dishonest breaches; Goodwin posed a risk to consumers and the financial system more widely and now he is paying a very heavy price."
Mr Goodwin agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount on his fine. Without this discount the punitive element of the fine would have been £240,000.
Jim Muir, Director at AutoRek, the global provider of financial management software, commented on the ruling: "It's always disappointing to learn of any fraudulent misappropriation by a trusted financial representative, one would have expected checks and balances to exist in the systems to detect such long-standing naughtiness. Automated client money reconciliations and calculations are now so auditable that the regulators and auditors can very quickly spot any problems. In any collusive fraud, especially among owners and directors of the business, external checks and balances should be able to relied upon. One would think that the 'not taken up' quotes (issued but not converting to policies) might have set alarm bells ringing at insurers too."