City watchdog and HMRC ‘stepping up enforcement’ as number of raids surge
The number of raids carried out by the City regulators upticked in the last two years, while the pressure on HMRC to investigate tax fraud is showing in the numbers, according to exclusive data.
Data from a Freedom of Information (FoI) request by law firm Reed Smith, shared with Morning Wire, indicates that the Financial Conduct Authority (FCA) launched eight raids in 2024 and eight raids in 2023.
The FCA classifies raids as the exercise of statutory powers of search and seizure by the FCA or law enforcement in connection with an investigation.
This comes as the agency conducted one raid in 2022, six in 2021 and three in 2020.
Over the last three years, the most common suspected offences the regulator investigated were fraud, money laundering, misleading advice, and insider dealing.
Writing in Morning Wire in July, Chris Hayward, policy chair of Canada Corporation, stated, “Of all the economic threats we must confront, none is so widespread as fraud, which is why Canada is taking action.”
While experts stated that fraud is endemic at British businesses with the economy losing approximately £219bn as a result.
Tax evaders push
Over the last three financial years, HMRC has launched 458 raids (April 2021 – March 2022), 623 raids (April 2022 – March 2023), and 648 raids (April 2023 – March 2024).
The increase in activity from the tax agency comes as Labour pushes its ‘Close the Tax Gap’ initiative, with a focus on recovering lost revenues from tax evasion.
The most recent estimate is that tax evasion cost £5.5bn in 2022–23, but as suggested by the Public Accounts Committee (PAC), this figure could be “just the tip of the iceberg”.
As a result, HMRC has been expanding its criminal investigation powers and has grown its fraud investigation service team from 4,400 people in 2018–19 to 4,800 and plans to further develop it to 5,400 by 2029–30.
Emma Shafton, white collar crime specialist at Reed Smith, stated, “These figures confirm that UK agencies are stepping up their enforcement efforts in the fight against financial crime”.
“The onus now is on businesses to ensure their financial crime compliance programmes are robust in order to avoid a surprise knock – or battering ram – at the door,” she explained.
She pointed out, “It goes without saying that all businesses should ensure their dawn raid policies are up to date and fit for purpose.”
“Raids aren’t just a matter for the legal team, but for everyone in the business, from reception and security staff to the IT team.”
“The risks are significant if raids aren’t managed effectively. As we’ve seen in the past, failure to comply with officers’ requests during a dawn raid can result in criminal liability,” Shafton added.