The Canadian boss of the island’s financial industry watchdog says taking enforcement action against companies is a deterrent.

Chief executive Karen Badgerow said it was all part of the vital work done by the Financial Services Authority which she stresses is ’not an ivory tower’.

Firms in the island’s finance sector were fined £87,000 and £90,000 earlier this year after FSA investigations into regulatory failings.

commitment

Mrs Badgerow said the ’critical’ point to make over this was the penalties imposed were ’proportionate to what the matters identified were. And I think to the credit of those who have been involved in our settlement process there had been a real commitment to fix it. That’s the right outcome’.

She added: ’It’s not just a matter of slapping a fine on and away we go. It’s all part and parcel of the entire package, the recognition of what needs to be fixed and then the fine and the public statement (on the FSA website). In fact the public statement is probably more powerful.

’The public statement has the real public impact. It is a really good deterrent message and I think it causes everyone to reflect on their responsibilities.

’Risk management is the responsibilty of boards and management and leadership in financial services and this is a means by which to reflect and share on the lessons learned from these cases. Areas where clear breaches of the code, gaps in your processes, and I think and hope that it has been of aid and others have taken heed and I think they have.’

Mrs Badgerow was speaking to Business News as she prepares to step down from the helm next year, a year earlier than planned. She will be returning to her family in Ottowa.

Sitting in the FSA’s base at Finch Hill House, Buck’s Road, Douglas, Mrs Badgerow agreed the financial industry’s watchdog in the island has been tough but fair with businesses.

She reflected on her time with the statutory body.

heart

She said: My original term was five years and then we added two years on. I love the job, I love the island, I love the staff, it is all plus plus plus, but the love for the family is greater and the desire of the heart is where your home is.

’I’m confident the board will find a fantastic replacement for me.

’And that they will bring their own set of skills and experience but being true to what we value here.

’The board knows just how important it has been what we have created here over the last five years as an organisation.’

She agreed that she has helped to bring in a change in culture at the statutory body.

’We tried to find a model of engagement with the industry that was at the right place. And we created an engagement model with accessibility.

’I’m always very proud when I hear from other people that we are accessible.

’You can get to my door, you can get to our directors’ doors, we engage with (the finance) industry.

’That’s really important.

’Culturally we are open and open for business and open for discussions and debates and challenge.

’And I think that is the environment we have created together and that is important.

’We are not an ivory tower regulator, we’re not and we will never be, and we listen.

’We also have a very good relationship with Treasury.’

She explained that ’we are a creature of statute but independent from government’.

But it was still important to have those ’gateways’ and ’links’ with government.

She said the FSA has focused on fine-tuning its practices.

Asked if she feels the FSA has had more bite and been tougher since she came to the FSA she said : ’I think we have really focused on fine tuning and focusing on our practises and there is a tremendous focus on vulnerabilities to financial crime across all jurisdictions.

’We have re-purposed some of the existing tools to make sure we focus on the right areas.

’Some may say we seem to be a lot more activist. I think we are more results orientated in terms of the fact that some cases might linger for a considerable period of time and that is not to the benefit of the jurisdiction. So I feel we have become a lot more focused on what we need to do around certain aspects of our mandate, one being anti money laundering.’

Mrs Badgerow has always made it clear that she has been keen to fight for ordinary people who can fall victim to financial crime and this was an issue she first mooted to Business News shortly after she arrived in the island in the autumn of 2015.

She says the organisation’s consumer focus has been on ’frauds and scams’.

She said: ’We have done a lot of work around virtual assets and making sure that consumers are aware of some of the potential issues and matters around virtual assets.’

(A virtual asset has been defined as a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes.)

Mrs Badgerow added that there is ’always going to be a risk in financial services but we want to guard against the risks that could be of a criminal nature. Fraud can come in that category,

’People are proud to be Manx and part of the Isle of Man and part of being proud is making sure we have a jurisdiction that is well respected and well regarded internationally, and it is.’

She said their work was important in being able to ’uphold the good reputation and the good business’.

She added that in the main ’by far the large majority of businesses (are) great business and we just want to make sure that we don’t taint the good business with the bad. That’s why we need to have the right focus.’

Mrs Badgerow stressed every jurisdiction has a vulnerability to financial crime and ’it is not unique to the Isle of Man by any stretch. Globally this is not just an Isle of Man, Jersey or Guernsey , Gibraltar problem.

’This is a global issue.

’We have an obligation as part of a global community to really put our minds to this.’

She said the FSA was ’marching on’ with its important work.

Mrs Badgerow said the island remains a fantastic place to do business.

She said one of the island’s great strengths is its diversified economy including the financial services industry.

She was proud one of her first tasks when she arrived in 2015 was to oversee the merging of the Financial Services Commission with the Insurance and Pensions Authority.

’That was really important’, she said. Mrs Badgerow said there was a consultation process under way with the finance industry ’over how we are going to be funded in the future’.

The body’s funding is currently 50% funded by the Treasury (ie taxpayers) and 50% funded by industry through levies and annual assessments.

A discussion paper was recently issued in October on the issue and the ’plan is to move us to a predominantly industry-funded model in the long term’.

She said the move, first mooted in the Treasury Minister’s Budget last February, would create operational independence from the government. But she said there is still a lot to discuss.

She has been with the authority since its inception in November 2015 and was due to leave in 2022 at the end of a seven- year assignment.

In announcing her resignation she confirmed her ’keen desire’ to spend more time with her family back in Canada and to pursue some personal interests as the drivers for this decision.

Mrs Badgerow will work closely with FSA chairman Lillian Boyle and the board of the authority over the coming months to assist with the recruitment process and ensure a smooth transition to the new chief executive.

Prior to coming to the Isle of Man she served more than 30 years with the Canadian government in senior roles in financial services regulation.

Most recently she was senior vice-president with the Canada Deposit Insurance Corporation (CDIC), heading up its insurance and risk assessment division.

Before joining CDIC, she spent more than 25 years with the federal banking and insurance regulator, the Office of the Superintendent of Financial Institutions, and was responsible in her last position for oversight of the federal banking sector.

She also represented Canada on a number of international committees.