PwC Fined £15M for Failing to Report Suspected Fraud at London Capital & Finance

PwC, one of the Big Four accounting firms, has been fined £15 million by the Financial Conduct Authority (FCA) for failing to report suspected fraud at London Capital & Finance (LCF).

This is the first time the FCA has issued a financial penalty against an audit firm. The FCA stated that PwC missed several audit red flags and failed to act promptly when they suspected fraudulent activity at LCF, a defunct financial services firm.

As LCF’s auditors, PwC was responsible for verifying the company’s accounts. During the audit, PwC encountered significant issues, including inaccurate and misleading information from LCF and aggressive behaviour from a senior employee towards the auditors.

Despite these concerns and a duty to report their suspicions to the FCA, PwC signed off on the accounts. Even after being satisfied with the accuracy of LCF's 2016 accounts, PwC still had an obligation to report earlier concerns, according to the FCA.

The FCA criticised PwC for not acting immediately, stating that their failure deprived the regulator of potentially crucial information.

LCF has been described by former investors as a Ponzi scheme and was condemned by the FCA for its "unfair and misleading" promotion of minibonds.

The firm entered administration in 2019 after the FCA ordered it to cease those promotions. Thousands of investors were misled and not fully informed of the product’s risks, according to the FCA.

A Serious Fraud Office criminal investigation into LCF's collapse is ongoing.
In response to the fine, PwC stated: "We have reached a settlement with the FCA to resolve an unintentional reporting breach."

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