Regulator fines Capita for anti-fraud failures

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The Independent Online

The support services group Capita was fined £300,000 by the Financial Services Authority yesterday, after it was revealed that the company's internal anti-fraud systems were not robust enough to prevent several raids on client accounts by its employees.

The fine, the first levied by the FSA for the failure of anti-fraud systems, was handed down after Capita discovered a series of attempted and actual frauds in its mutual fund administration division, conducted at the end of 2004.

An internal investigation revealed a number of its employees had been accessing client accounts, changing their names and addresses, and making payments without their consent.

The fraudsters extracted£328,241 from client accounts. However, the company prevented the payment of a further £1.13m in attempted fraud.

Philip Robinson, the head of the FSA's crime division, said: "The nature of [Capita's] business ... makes it particularly vulnerable to fraud. Yet the firm failed to adequately consider this risk in the business."

The FSA said Capita had put procedures in place since 2004 to ensure such an incident could not happen again. In a statement yesterday, Capita said it accepted the decision. "Between August 2004 and December 2004, a small number of staff colluded to commit fraud," it said. "CFA took swift action to ensure clients suffered no financial loss and undertook a comprehensive review of ... procedures.

"The company has changed its management, improved controls and established a more robust governance structure. In assessing the level of the financial penalty to be imposed, the FSA has given credit to CFA for the remedial action it has taken and for fully co-operating with the FSA."

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