PwC fined £15m for not reporting suspected fraud

Accounting firm PwC has been fined £15 million by the Financial Conduct Authority (FCA) for failing to report suspected fraud at the now-defunct London Capital and Finance (LCF). This marks the first time the FCA has imposed a financial penalty on an audit firm. The FCA highlighted that PwC had identified several "red flags" during its 2016 audit of LCF but did not act promptly to report these concerns, which included receiving inaccurate and misleading information from the firm. The FCA's investigation revealed that PwC's audit work raised suspicions of potential fraudulent activity at LCF, which ultimately collapsed in early 2019, leaving nearly 12,000 investors, many of whom were elderly, with losses totaling around £237 million. Despite concluding that LCF's accounts were accurate, PwC had a legal obligation to report its suspicions of fraud to the FCA, a duty it failed to fulfill in a timely manner. Therese Chambers, the FCA's joint executive director of enforcement, emphasized the critical role auditors play in maintaining market integrity. She stated that PwC's inaction deprived the FCA of crucial information that could have aided in preventing further investor losses. In response to the fine, a PwC spokeswoman noted that the firm has reached a settlement with the FCA regarding what it termed an "unintentional reporting breach." LCF has been described by former investors as a Ponzi scheme, and the FCA has condemned its misleading promotion of high-risk financial products known as minibonds, which did not adequately inform investors of the associated risks.