Welcome speech for International Boiler Room Conference
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Speech by Margaret Cole,
Director of Enforcement, FSA
International Boiler Room Conference
10 November 2008
I’m pleased to welcome you all to the FSA’s International Boiler Room conference. This is the largest conference of its kind to date, we have representatives of governments, law enforcement agencies and regulators from as far afield as Vancouver, Rio, Cairo and Tasmania, in addition to a variety of organisations from the UK. Your presence here shows how seriously we all take boiler room fraud. It’s a problem with serious consequences for people everywhere, and it requires a robust international response.
I’m particularly pleased that the Attorney General, Baroness Scotland, is with us today. The Government’s Fraud Review resulted in the creation of the National Fraud Strategic Authority – set up as an agency of the Attorney’s office. This new authority will play a key role in the fight against boiler rooms here in the UK.
The FSA has four statutory objectives – maintaining confidence in the financial system; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and reducing financial crime. Boiler room fraud is a serious financial crime, with severe economic consequences for its victims. We are committed to tackling this form of crime - by targeting the criminals and those that help them, and by educating people so that they recognise the scam and can help themselves by avoiding becoming victims. Jonathan Phelan will talk more about our efforts in this area later this morning.
The current turbulence in the financial markets illustrates the global nature of the financial services industry. This globalisation is also true of unregulated, criminal activity – fraud is not just committed in one country and it can’t be fought in isolation.
At the FSA, our investigations often involve boiler rooms operating out of one country, targeting people in another. But when we follow the trail of the victims’ money, we often find a complex web that may take in a further five or six jurisdictions spanning several continents. And to take effective action we need to get right to the root of the operation.
To be able to do this, we need to form strong alliances with our international counterparts, and we need to work determinedly towards a common goal, sharing information and ideas and understanding that boiler rooms mean serious organised international crime. We need to achieve credible deterrence – to deter criminals from engaging in boiler room fraud. Criminals must realise that they face a real and tangible risk of being held to account, and must also expect to face serious consequences, including custodial sentences. I’m convinced that by working in partnership together, we can achieve this.
In the UK, we’ve already had some success in our fight against these criminals. I’m sure many of you here have also had successes. It’s important to acknowledge and draw inspiration from these and I hope we’ll hear more about them over the next couple of days.
I know there have been many examples of effective international partnerships securing excellent results against boiler room operations. Tomorrow you’ll be hearing from the key players in the Rocky Mountain case, a great example of agencies from different countries and provinces working together. This case involved the FSA, the Ontario Securities Commission, the British Colombia Securities Commission and the US Attorney’s office – working together to help repatriate funds of $2m to 153 investors. Cases like this prove just how much we can achieve when we share a common purpose.
Our colleagues at the City of London Police are co-ordinating Operation Archway, the UK’s national intelligence reporting system for boiler room fraud. You’ll be hearing from them later on the new trends that they are seeing.
While we’re happy to celebrate our achievements, we must stay focussed on the new challenges that criminals behind boiler rooms continually present us with. Criminals are constantly using more sophisticated techniques to dupe investors. Some boiler rooms have started using the names and registration numbers of legitimate, authorised firms to draw in their victims. We’re also seeing how they are broadening the base of their operations, using new jurisdictions in an attempt to evade our attention. And we’re seeing more money being diverted via Central and South America.
In this uncertain financial climate, we might expect people to be more wary of taking risks with investments. But, studies show that white collar crime can increase during times of recession. Criminals become ever more creative and energetic in their attempts to make money, and vulnerable people face even greater risks.
My colleague, Chris Pond, will be speaking later today about the FSA’s to help consumers. I think it’s important that we confront a common perception about the victims of boiler room fraud. It has been suggested that they are victims of their own greed or gullibility and that we shouldn’t be spending so much time and energy trying to help them. But the reality is that it’s often vulnerable people who are specifically targeted.
In many cases, the victims suffer huge losses which have a devastating effect on their lives and their families. And the fraud, which may, with the benefit of hindsight, seem blindingly obvious to onlookers, is communicated so persuasively, so professionally and so convincingly that despite our best efforts people are still falling for it.
We, as regulators, law enforcement and government agencies, are committed to protecting people from organised crime and we can only do this by keeping up with the criminals or better still, being one step ahead. That means studying the trends, being alive to the challenges and learning more from each other. And that’s why we’re here today.
So what do we want to achieve over the next day and a half? Well, we want to see a recognition of the scale of boiler room fraud and agreement that we need to work together to fight it. We also want to develop concrete strategies that will help us do just that, and a collective commitment and pledge to taking these strategies forward.
To achieve this we need to improve our understanding of the global scale of the boiler room problem by sharing our experiences. We have representatives here from countries which, no doubt unwittingly, host boiler rooms. We also have representatives here from countries whose consumers appear to be particularly targeted by boiler rooms. We may have representatives from countries who are only recently finding out they’ve got a problem and want to learn more about what they can do.
We intend that this conference will be a forum where we learn more about how our counterparts around the world tackle boiler room fraud. We want to look carefully at what has been successful and what has not been so effective in the past. We hope we can generate new ideas, perhaps by challenging existing practices and procedures. We want this to be an open, constructive and creative forum and we value everyone’s contribution.
As Sally mentioned in her introduction, we’ve structured the conference around three broad and central topics;
- what we can do to help people;
- what we can do to fight the boiler rooms; and
- what we can do to work better together.
There will be a panel session devoted to each topic and we have invited delegates from a range of organisations around the world to sit on each session and discuss their experiences.
You will have the chance to ask the panellists questions but I also encourage you to offer your experiences as well and I hope you’ll take this opportunity to become involved in each session. We’ll also hear from guest speakers who all have interesting angles on the boiler room problem to share with you.
Our aim by the end of this conference is to have devised new strategies to help us enhance the effectiveness of our work and create even stronger deterrence against boiler room fraud. We know that the challenges we face when fighting boiler rooms can’t be tackled effectively by working in isolation. We know that we face jurisdictional constraints in the work we do and we need to think about how these might be resolved. We know that we face a persistent enemy that can flourish in the gaps created when we fail to work together.
As I mentioned earlier we frequently follow a boiler room trail to find that its roots spread far and wide. We want to develop a united and global front against this crime. We want you to leave us tomorrow afternoon committed to common strategies and focussed on the cause of defeating boiler rooms.
We also hope that you’ll have made some useful contacts and will connect with each other sharing both general and specific information. One of my colleagues in the FSA’s Enforcement division recently attended a conference in Toronto. He was telling me earlier that following a chance conversation over lunch with a fellow delegate he was able to make some excellent progress in relation to a boiler room case we are currently looking into.
Boiler room fraud is a global problem, which affects people in all our countries. I’m confident that by the end of this conference, we will have moved forward in our work to combat it by securing a strong and enduring commitment to work together.