City watchdog on course to levy £100m in fines this year

• JP Morgan was hit with a 33.3m fine by the FSA for mishandling client funds Picture: Getty Images

The Financial Services Authority (FSA) has handed out 67 fines worth a total 84.3m so far in 2010, putting it on course for an end-of-year figure at least three times the 35m doled out in 2009. And its former chief operating officer believes that more big fines are on the way despite the impending break-up of the regulator.

The FSA is to be scrapped in 2012 under plans set out by the coalition government, with the regulation of financial services handed to the Bank of England.

But there has been no sign of any let-up in FSA enforcement and more high-profile fines are to be announced over the coming weeks, including action against two of the UK's biggest high street banks for complaint handling failures.

More than half of this year's total is accounted for by two firms. Goldman Sachs was fined 17.5m last month for failing to tell the FSA that one of its traders, Fabrice Tourre, was under investigation by US authorities when he took up a job at its London office in 2008. However, the record was set in June when JP Morgan was fined 33.3m for mishandling client funds. Another 5.6m penalty was handed out to Royal Bank of Scotland in August for failing to have adequate systems in place to prevent breaches of UK financial sanctions.

But small firms have borne the brunt of the FSA's hardened approach to regulation this year and almost a third of the fines have been of less than 100,000. Market abuses, failure to protect client money, mortgage fraud, money laundering and failure to co-operate fully with the FSA are the most common reasons for enforcement action.

A spokesman for the FSA said: "Enforcement penalties are a powerful tool to help change behaviour in the industry. In line with our philosophy of credible deterrence, we believe that hitting companies and individuals in the pocket sends a powerful message making it clear that non-compliant behaviour will not be tolerated."

David Kenmir, former chief operating officer at the FSA and now director at PricewaterhouseCoopers, said the watchdog had adopted a more intrusive style of regulation after the near-collapse of Northern Rock in 2007.

"There has been a change of emphasis in the way the FSA thinks about enforcement," he said. "It used to say it wasn't an enforcement-based regulator but it now talks a lot about credible deterrence. There was also a technical change in 2009 when it decided to increase the severity of its fines."

Kenmir, a member of the FSA board before he left last year, said the planned regulatory shake-up would not result in a softening of the enforcement approach."While the FSA is in place there is no doubt that it will continue to execute its strategy. Enforcement is an important part of the regulatory armoury, although the damage is often less financial than to reputation."