CFA fined for anti-fraud control failure

LOSSES & LAWSUITS

In late March, the regulator announced that it was fining Capita Financial Administrators, a third party administrator of collective investment schemes, £300,000 for poor anti-fraud controls over client identities and accounts.

According to the FSA, the fraud appears to have been facilitated by colluding CFA staff. The initial frauds were not discovered by CFA but instead were brought to the firm's attention by clients.

"With fraud becoming an increasing menace, firms must fully understand the risks they face and have robust anti-fraud controls in place," said Philip Robinson, Financial Crime Sector leader.

CFA is a third party administrator that is responsible for carrying out client instructions to buy and sell investments. In August 2004, CFA discovered that a client's name and address had been changed and the sale of units was being processed without instructions from the client.

The firm then found that the data for five other clients had been subject to unauthorised changes. Fraudulent requests for payments totalling £1,134,938 had been made but were stopped from going ahead by CFA.

Further payments and attempted payments were uncovered upon further investigation.