PwC fined £15m over fraud at London Capital & Finance
PWC has been fined £15m for failing to warn of suspected fraud at London Capital & Finance (LCF).
The accountant is the first accounting firm to be fined by the city’s regulator.
The Financial Conduct Authority’s investigation found that PWC’s audit team had identified several “red flags” while working on the mini-bond company’s 2016 accounts, but that the regulator had not been notified of these.
Warning signs included a senior executive at LCF who behaved “aggressively” towards the accountants and the firm providing PwC with incorrect and misleading information.
The accounting giant also called the audit “very complex” and claimed it took much longer than expected.
Hit hard: PWC is the first accounting firm to be fined by the city’s regulator
PwC subsequently suspected fraud within LCF, but did not report this to the supervisor and did not sign the annual accounts properly.
A spokesman for the watchdog said: “PwC was obliged to report these suspicions to the FCA as soon as possible, but they failed to do so.”
Therese Chambers, director of enforcement at the City regulator, added: “They should have taken immediate action. By not doing so, the FCA was deprived of potentially vital information.” LCF collapsed in 2019, owing around £237m to more than 11,600 investors who had bought the toxic mini-bonds. The collapse would become one of Britain’s biggest investment scandals, as many of the investors were elderly and had invested their entire life savings in the company.
Much of the money went into speculative property developments, a helicopter purchased for a company controlled by LCF and equestrian events.
The administrators’ attempts to recover the funds are ongoing, while more than £170 million has been paid out to bondholders through government compensation schemes.
A PwC spokesperson said: ‘We have reached a settlement with the FCA to resolve an accidental reporting breach.’
In May, the Financial Reporting Council fined PwC and EY for failing to identify and properly understand LCF’s operations and internal controls. The audit watchdog imposed fines of £4.9 million and £4.4 million respectively.
Meanwhile, the Serious Fraud Office has launched a criminal investigation into the collapse of LCF, whose former boss Michael ‘Andy’ Thomson was sentenced to 10 months in prison in 2023 after breaching a restraining order on his bank account.
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