When a UK regulatory body like the FCA, HMRC, or ICO announces a headline-grabbing fine against a corporation for wrongdoing, the public is meant to feel a sense of justice served. But for victims of financial misconduct, these penalties rarely bring closure — let alone compensation.
A critical question was raised in recent correspondence:
“When UK authorities fine a company for breaking the rules, does the money go to victims? Or does it vanish into the system, leaving victims behind?”
The answer exposes a structural flaw that few outside the legal and financial elite understand — but one that lies at the heart of systemic financial abuse.
Fines Flow to the Treasury, Not to the Victims
Regulatory fines in the UK are typically paid into the Consolidated Fund, held by HM Treasury. This fund is used to finance general public spending — not victim redress.
Unless a specific redress scheme is established alongside enforcement, victims receive nothing from these penalties. This model turns justice into a revenue stream for the state, while leaving the injured parties to fight alone through civil litigation or long-delayed compensation schemes like the FSCS.
Settlements That Shield the Guilty
Companies often settle with regulators behind closed doors. These settlements:
- Include no admission of liability,
- Frequently contain confidentiality agreements, and
- May preclude further legal action, either in spirit or practice.
This creates a regulatory smokescreen — an illusion of accountability that, in reality, protects the institutions that caused harm.
Auditors, Adjudicators, and the Legal Shell Game
We highlight the importance of distinguishing between auditors and adjudicators. The public often conflates these roles, believing someone is independently “checking” for wrongdoing. Yet both can be deeply conflicted — beholden to the very firms they oversee.
Further, once an adjudicator (like the Financial Ombudsman Service) has issued a “Final Decision,” it is subject to the legal principle of functus officio — meaning it cannot be reopened, even if new evidence emerges. In other words, the decision-maker’s function is complete.
Delay Is a Strategy – Not a Failure
Behind all this is a disturbing trend: time is weaponised.
As victims seek redress, they are passed from one agency to another — FOS, FSCS, courts, trustees, liquidators — all while legal firms and administrators rack up fees, paid for with Other People’s Money (OPM):
- Taxpayer funds,
- Consumer charges,
- Pension assets,
- And the very redress schemes meant to protect victims.
This creates a perverse incentive to delay justice, not deliver it.
A Call to Reform
It’s time to ask the hard questions:
- Why aren’t fines ring-fenced for victim compensation?
- Why are settlements allowed to avoid public accountability?
- Why do victims face “closed doors” once a final decision is issued, even in light of new facts?
- Why is the public misled into thinking justice has been served — when the perpetrators walk away and the victims suffer in silence?
True justice must centre the human cost. It must shift from performative penalties to meaningful restitution. Until then, regulatory fines are not a sign of justice — they’re evidence of a system protecting itself.
Conclusion
The current system offers theatre, not remedy. It uses the language of accountability while enshrining impunity. Victims deserve more than headlines — they deserve to be made whole.
And until that changes, it’s not justice. It’s just business as usual.
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This article rightly challenges the illusion of justice presented by UK regulatory bodies — and it’s worth digging even deeper into one of the most persistent myths: the idea that the Financial Ombudsman Service (FOS) acts as an arbitration service.
In reality, FOS decisions are governed by strict DISP rules, not by mutual agreement between parties. This contrasts sharply with arbitration, where both sides agree on procedures and terms — often allowing financial firms to tilt the process in their favour. This distinction was laid bare in Berkeley Burke SIPP Administration LLP v Charlton [2017], a case with direct relevance to many victims of pension abuse.
The principle of functus officio is also critical here: once the FOS issues a Final Decision, the case is legally closed — even if further evidence comes to light. This is not a safeguard for justice but a procedural barrier that serves institutions, not individuals.
It’s also vital to understand how flawed auditing has enabled these failures. PWC, for example, often acts as a first-party auditor — paid by the organisations they assess, leading to clear conflicts of interest. By contrast, third-party auditors like the National Audit Office (NAO) are supposed to be impartial, and in a 2012 report, the NAO actually recommended the removal of the FOS’s adjudicator role to streamline the complaints process. That reform, implemented in 2015/16, was deeply flawed — as highlighted by the Dispatches investigation.
Perhaps it’s time to explore a second-party audit model — where the customer audits the supplier. It’s standard practice in manufacturing and engineering sectors, yet virtually unheard of in financial services. Empowering consumers in this way could be a key step toward restoring integrity and transparency in a system that has become far too comfortable with its own opacity.
The companies that are being fined are using the victims stolen money to pay them. The companies pay zero and the victims are ultimately fining themselves.