Claire Cross Highlights FCA Fine-Setting Challenges for Law360

The Upper Tribunal’s decision to cut the FCA’s £10 million fine against Banque Havilland to £4 million raises fresh questions about how the regulator calculates penalties. Claire Cross, partner at Corker Binning, notes that “the FCA may need to go back to the drawing board when it comes to penalty-setting and stop trying to chase headlines.”

FCA May Be Forced To Set Lower Fines After Appeal Setbacks

Law360, London (February 13, 2026, 6:32 PM GMT) — The Financial Conduct Authority might be forced to rethink how it justifies the size of its fines after being forced to cut penalties after referral to the Upper Tribunal, raising questions about its ability to make enforcement decisions stick, legal experts caution.

The Upper Tribunal’s decision earlier in February to cut the fine the FCA handed to Banque Havilland was the latest warning that the authority might need to overhaul its fine-setting process. The tribunal cut the penalty to £4 million ($5.4 million) after it found the original £10 million an “arbitrary figure.”  The tribunal rehears FCA enforcement cases when they are referred by applicants. As it did in the case of Banque Havilland, a private lender now known as Rangecourt SA, it often appears to apply a more rigorous approach to arriving at the correct fine than does the watchdog — and produces a different figure.  “This case demonstrates that a challenge to the Upper Tribunal can be worthwhile in terms of achieving amore sympathetic approach, including obtaining some recognition of mitigating factors,” Katie Stephen, co-head of the contentious financial services group at Norton Rose Fulbright
in London, said.  Given the apparent inconsistency in the way the FCA sets fines, its objective of deterring similar misconduct might appear to be in danger. “This objective is arguably at risk when the level of any penalty is unpredictable, and those with the resources to do so are able to take the chance of achieving significant discounts at the Upper Tribunal if they feel they are subject to a seemingly arbitrary outcome,” Stephen said.

Referrals Fuel Industry Discontent

Banque Havilland is the latest in a series of referrals to the Upper Tribunal, a trend that has fuelled discontent in the financial sector over how the FCA applies its five-step fining process. And the lack of full transparency around its decisions has created discontent. The tribunal found in June that the FCA had failed to consider mitigating factors, which it is required to do, when it fined former executives at Metro Bank after the lender published misleading financial statements in 2018.  Then, in July, the tribunal rejected the FCA’s view
that a bonus that James “Jes” Staley had not received was relevant to the fine imposed on the former Barclays boss for having misled regulators over his ties to sex offender Jeffrey Epstein. The tribunal cut that fine from £1.8 million to £1.1 million.  Earlier, in November 2024, the tribunal found the FCA had set its deterrence calculation too high when it
penalized a broker, Arian Financial LLP, handing it a fine of £744,000 in a cum-ex trading case. Traders use cum-ex to swap shares before dividend payment to enable several claims to be made on one tax refund. Lawyers predicted that the tribunal’s decision on Banque Havilland on top of these and other cases will spur more referrals to the Upper Tribunal this year as a run-up to forcing the FCA’s hand in improving its approach to setting fines.

‘Chasing Headlines’

“Although the Upper Tribunal was willing to step in on this case and drastically amend the penalty, those who find themselves on the receiving end of FCA enforcement action should not have to rely on the court to intervene,” Claire Cross, a partner at Corker Binning, said of the outcome in Banque Havilland. “The FCA may need to go back to the drawing board when it comes to penalty-setting and stop trying to chase headlines.” This means the FCA should become more careful in cases where it bases its fines partly on comparable cases. As it tried to justify its fine on Banque Havilland, the FCA asked the tribunal to compare two other penalties — the £324 million fine it handed to Deutsche Bank in 2015 for trying to manipulate an interest-rate benchmark and the £3 million fine it imposed on Bank of Beirut (UK) Ltd. that year for failing to cooperate.  The tribunal found the cases were not comparable. And it got no answer from the FCA when it asked why a £10 million fine for Banque Havilland was more appropriate than £20 million or £5 million.

Forcing The Watchdog’s Hand

Lawyers have found that it will be almost impossible in future to find genuine parallels between penalties because FCA enforcement cases are so individually focused. The FCA published its decision on Banque Havilland in January 2023, two months before the end of the lender’s accounting and reporting period. At this point, the cumulative total of its fines can have an impact on the perception of the regulator’s effectiveness — unfairly or not.  “The timing of the FCA’s original perspective in this case is unhelpful from the FCA’s perspective,”
TLT LLP partner Chantal Stroker warned. But, leaving aside industry perceptions, there is a risk that flawed decision-making will go undetected if the FCA does not disclose its workings in future cases, according to lawyers. Smaller companies and individuals might suspect there are flaws, but they cannot always afford to take the matter to a tribunal, even when they consider the FCA has inflated the fine.  “The costs of a tribunal hearing to challenge a penalty is often disproportionate except in larger cases and— even where the subject is successful in appealing the level of penalty — the costs of litigation can outweigh any saving,” Guy Wilkes, a partner at Mishcon de Reya LLP, said.

Two-Tier System

Lawyers foresee that a two-tier system will become entrenched. Larger companies will be increasingly ready to challenge a disputed fine-setting process until the FCA makes its approach more rigorous and transparent, and smaller ones will have to bear the impact of the original fines.  Even so, some businesses and individuals targeted by the FCA are reluctant to take matters to the tribunal. They fear they would lose the permitted 30% discount it offers on fines as a reward for early settlement, with no guarantee of a more favourable outcome.
Businesses faced with an FCA fine can protect this discount by accepting liability and challenging the watchdog solely on the penalty, according to lawyers. But few have taken this route.

Inconsistent Size of Penalty

Lawyers have noticed widespread inconsistency in the size of fines imposed by the FCA, for which it has not always provided an explanation.  The FCA levied a fine of £44 million
on Nationwide Building Society in December for anti-money laundering failings. The authority said that 15% of revenue relevant to the breaches — a measure it uses to decide on the right fine — was £249 million. But it cut this figure by 77% to £57 million, explaining this only by referring to “previous cases.”  The FCA fined Santander UK PLC £108 million
for AML failings, without the same type of cut, in December 2022. However, in 2017, the regulator fined Deutsche Bank £163 million with an 88.5% cut to make it proportional to the breaches. The FCA considered the seriousness of the breach to be at the same level in both cases, as Mishcon de Reya has noticed.  “Practitioners agree with the tribunal that FCA penalty-setting can be opaque and that the FCA should set out in significantly more detail in its notices how it has determined penalty, including references to any comparator cases that the FCA has relied on,” Wilkes said.

FCA Decisions Committee ‘Too Deferential’

Problems potentially start with the FCA’s internal processes. Its Regulatory Decisions Committee, known as RDC, decides on fines for companies in cases not settled with the FCA after it has considered recommendations from the watchdog’s enforcement division. But lawyers question whether it has teeth. “The RDC needs to do more to hold enforcement teams to account,” David Rundle, a partner at Bryan Cave Leighton Paisner LLP, said. “The RDC’s margin of deference has become too wide.” Rundle said the RDC should demand that the FCA “properly justifies the calculation with actual evidence” when it proposes imposing a fine if the amount is not based on relevant revenues or it does so to deter others. “The FCA’s board should be doing more to insist that the RDC on its behalf is scrutinizing the penalty process to avoid arbitrary results,” Rundle added

Could Government Intervene?

The critical question ahead is whether the industry will have any confidence in the FCA’s ability to use its powers within that framework in a responsible and transparent manner, according to lawyers. In the meantime, according to lawyers, the FCA is under unprecedented pressure to reconsider how it justifies penalties. Lawyers foresee that the government could step in as a last resort to force the regulator’s hand. They warn that the multiple criticisms coming from the tribunal over its approach to fines has increased the likelihood of it happening soon. “While the government always has the ability to intervene, meaningful intervention is more likely where tribunal findings generate sustained adverse publicity and a perception of systemic concern, rather than in response to isolated decisions,” Lisa McKinnon-Lower, criminal litigation partner at Spencer West LLP, said.

This article was first published by Law360 on 16th February 2026