The financial crisis and financial crime in the United Kingdom: A critical analysis of the response by Financial Regulatory Agencies

A previously unattributed factor that contributed towards the most recent financial crisis is financial crime. However, it is important to note and accept that financial crime was not the sole and only cause of the financial crisis. For example, it has been asserted by economists, the International Monetary Fund, the United States Department of Treasury, HM Treasury, official enquiries and academic commentators that the foundations of the financial crisis were laid as a result of the collapse of the United States subprime mortgage market. Others have argued that the foundations of the financial crisis were placed by the continued use of low interest rates by the Federal Reserve. Additional factors, which are beyond the scope of the article, include high levels of consumer debt, toxic debts, securitisation, deregulation of banking legislation, ineffective macroeconomic policies, weak credit regulation, deregulation of consumer credit legislation, the self-regulation of credit rating agencies, the culture of some banking practices and weak banking regulation. Initially, the link between the financial crisis and financial crime was difficult to quantify. There is no ‘super villain’ that has become the face of financial crime during the financial crisis. However, research has concluded that several different types of financial crime have interacted with the traditional variables, as outlined above, that contributed towards the financial crisis. It is my contention that this includes the relationship between subprime mortgages and mortgage fraud, predatory lending, Ponzi fraud schemes, market misconduct and market manipulation. It is not the purpose of this article to review each of these in detail, but to critically consider the response in the United Kingdom by the financial regulator towards financial crime during and after the financial crisis