The Financial Services Authority has confirmed that there have been no successful criminal prosecutions following its investigations into regulatory breaches since at least 2016.

Members of the island’s financial services sector have accused the regulator of acting as ‘judge, jury and executioner’ by clamping down on relatively minor breaches of compliance, Media IoM reported last month.

They have highlighted what they see as a disparity between ‘over-regulation’ of one sector by the FSA and a seemingly relaxed approach by the Gambling Supervision Commission in attracting overseas gaming operators to the island.

The FSA has issued 19 discretionary civil penalties for compliance breaches since 2016, when the island was last inspected by anti-money laundering monitoring body MoneyVal - the most recent a fine of £614,000 imposed only last week on one of the island’s largest trust and corporate services providers.

This followed a fine of just under £294,000 imposed on HSBC IoM last month and one of just under £120,000 handed to Capital International in September.

The FSA said it conducted a total of 725 inspections during 2023-24. Five matters were subsequently referred to its enforcement division for possible investigation and three to its enhanced supervision team.

But asked how many enforcement investigations have resulted in a successful prosecution since 2016, the FSA replied: ‘There have been no successful criminal prosecutions/convictions to date.

‘This information would be a matter of public record. The authority collaborates with a number of other government agencies, including law enforcement, to determine whether it is reasonable and proportionate to refer any matters.’

The FSA said it does not take forward criminal prosecutions. ‘In matters where it is determined that a criminal prosecution may be required, the case would be referred to HM Attorney General’s Chambers or to the IoM Constabulary via established processes and procedures for their consideration and assessment,’ it said.

Members of the financial services sector who spoke to Media IoM did so only on the basis that they would remain anonymous, and claimed people were ‘scared’ and ‘feared repercussions’ if they spoke out.

One said: ‘Their sole mission is to find reasons to breach you and fine you. The FSA should be collaborative, but they are antagonistic, authoritarian and belligerent.’

In response, the authority said it always welcomes ‘honest and constructive feedback’.

It said it ‘seeks to be approachable and collaborative and to work positively with industry bodies and associations across all sectors of the economy, providing a forum for individuals and firms to raise any issues via their representatives’.

The FSA said it is planning to conduct a ‘holistic’ review of the civil penalties regime and will invite feedback through a public consultation to be published in 2025.

A transition is under way to a predominantly industry-funded model and is currently in the second of three years of phased annual fee increases, it said.

Before April last year, income from discretionary civil penalties arising from enforcement and settlement were not included in the FSA's income and expenditure account as they are paid into government general revenue. That income was £307,292 for 2022-23, £472,409 for 2021-22, £160,044 in 2020-21 and £109,477 in 2019-2020.

The regulator also received an annual government grant of about £3.5m.

Since April 2023, income from discretionary civil penalties will be offset against the FSA’s enforcement costs and any remaining balance will be passed to Treasury.

Retaining all incomes from penalties was ruled out following a public consultation, to ‘mitigate the argument that the authority might be incentivised’ to impose fines, the regulator said.

The 2023-24 accounts will be the first to include the new accounting treatment and will be published soon.

The FSA said the government grant reflects the difference between fee income and expenditure and from April last year will take into account the net income from discretionary civil penalties.

On Friday, the regulator made a public statement confirming it had imposed a £614,000 fine on one of the island’s largest trust and corporate services providers for paper breaches of the anti-money laundering code.

The financial regulator said it was ‘reasonable and proportionate’ to impose a discretionary civil penalty on IQ EG IoM after identifying historic regulatory failings.

An investigation had found instances of non-compliance in relation to financial services rules and the anti-money laundering and countering the financing of terrorism code.

The contraventions were attributed to deficiencies in the procedures, systems and controls but the FSA noted IQ EQ IoM had co-operated fully with the authority and agreed settlement at an early stage.