Enforcement: UK FSA bans insurance company director

Whilst not a participant in the fraud, as a director of Surety Guarantee Consultants Limited (SGC), Williams deliberately ignored his responsibilities as an approved person, turning a blind eye despite clear warnings about the true nature of the scheme, the FSA said.

SGC was established in 2004 to write a form of insurance known as surety bonds. A surety bond is a guarantee, often used in the construction industry, that a contractor will meet the terms of its contract with a client. If the contactor fails to meet the terms of the contract, the client would be paid by the provider of the bond, typically an insurance company.

Between January 2005 and August 2006 SGC held binding authorities with London market insurers, Markel and QBE (through its agent Amalfi) and wrote business that exceeded its authorised limits, exposing Markel and QBE to greater liabilities than they had agreed.

A binding authority is an agreement between an insurer and a third party (referred to as the "coverholder") under which the coverholder may, in accordance with the terms of the agreement, accept risks and/or settle claims on behalf of the insurer.

What SGC did was write business, collect premiums but not tell the insurers that they had done so.

In doing so, SGC made secret profits and withheld over GBP2 million that should have been paid to the insurers.

When SGC was audited by the insurers it produced false documents intended to show that it had kept within the terms of the binding authorities.

Williams did not profit directly from the fraud. However, he deliberately ignored serious concerns about signing surety bonds on behalf of the insurers in excess of the agreed limits. He was also found to have lied to the insurers to hide the scheme, allowing himself to become involved in the fraud.

From a proposed fine of GBP50,000, The Upper Tribunal (Tax and Chancery Chamber) reduced the penalty to GBP25,000 in light of Williams' personal circumstances. It upheld the decision to ban Williams and withdraw his existing approval.

In July last year Timothy Higgins and Clifford Felstead of SGC and Ralph Brunswick of Templeton Insurance were banned from working in regulated financial services for their role in the fraud.