FSA fines and bans director over £2m insurance fraud

The FSA has fined Barry Williams, a director at Surety Guarantee Consultants (SGC), £25,000 for his role in a scheme that defrauded London market insurers of more than £2m.

The regulator says while Williams was not directly involved in the fraud, he ignored his responsibilities as an approved person by turning a blind eye despite clear warnings about the true nature of the scheme.

SGC was established in 2004 to write a form of insurance known as surety bonds. SGC held binding authorities with London market insurers, Markel and QBE—through its agent Amalfi—between January 2005 and August 2006.

SGC wrote business that exceeded its authorised limits, exposing Markel and QBE to greater liabilities than previously agreed. This resulted in SGC making secret profits and withheld over £2m that should have been paid to the insurers.

“We will continue to take action against anybody else tempted to act in this way”

When audited by the insurers, SGC also produced false documents which said it had kept within the terms of the binding authorities.

Despite not profiting from the scheme, Williams was found to be ignoring serious concerns about signing surety bonds on behalf of the insurers that were in excess of the limits agreed. He was also found to be lying to insurers in a bid to hide the scheme. (article continues below)

The fine was lowered from £50,000 by The Upper Tribunal (Tax and Chancery Chamber) to £25,000 in light of Williams’ personal circumstances, however, it upheld the decision to ban him and withdraw his approvals.

In July 2010, both Timothy Higgins and Clifford Felstead of SGC and Ralph Brunswick of Templeton Insurance were also banned from working in regulated financial services for their role in the fraud.

Margaret Cole, the director of enforcement and financial crime at the FSA, says: “In believing that he could be a ’sleeping director’ without incurring any responsibility, Williams did not take his accountability as an approved person seriously. He recklessly abused the trust and confidence placed in him by leading London market insurers and by doing so enabled secret profits to be made from the fraud by his colleagues.

“The London market relies on the trust and integrity of those who work in it. This sort of breach of fiduciary duty and lack of integrity amounts to very serious misconduct and will not be tolerated in the insurance industry or anywhere else in financial services. We will continue to take action against anybody else tempted to act in this way.”