In this edition of the UK Enforcement newsletter, we provide an update on recent economic crime matters in the UK. We consider the recent regulatory and enforcement actions taken by the Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), the Financial Reporting Council (FRC), and the UK's Gambling Commission. We also report on proposed legislative reforms, as well as recent updates in relation to sanctions and the growth of cryptoasset-related regulation.
With respect to enforcement, governmental matters, and legislative reform, we consider the following topics:
- SFO secures its first DPA-related conviction of an individual
- SFO abandons its case against G4S executives
- Recent enforcement actions by the FRC, FCA, and the Gambling Commission
- The new "failure to prevent fraud" offense in the Economic Crime and Corporate Transparency Bill
- FCA's 2023/2024 business plan
- Review of the UK's whistleblowing framework
- Updates with respect to cryptoasset-related regulation
- Updates with respect to sanctions against Russia
As part of our social commentary, we consider the following topics:
- Ongoing efforts towards a more inclusive workforce throughout the regulated financial sector
- Guidance for companies on how to measure, report on, and address any ethnicity pay differences within their workforce
SFO secures its first DPA-related conviction of an individual
In February 2023, following the lifting of reporting restrictions, the SFO reported that Roger Dewhirst, a former director of a project management company, pleaded guilty to bribery offenses in May 2022. After several failed attempts, this marks the SFO's first conviction of an individual after reaching a deferred prosecution agreement (DPA) with a company over related conduct.
Reporting restrictions were put in place when the SFO opened its investigation into suspected bribery concerning Bluu Solutions Limited and Tetris Projects Limited (the companies) in 2017. In 2021, the companies simultaneously agreed to enter into DPAs, remaining anonymous pending resolution of an ongoing investigation into connected individuals. We commented on these DPAs in an earlier newsletter. Under the terms of the recently published DPAs, the companies respectively accepted responsibility for four counts of bribery and one count of failure to prevent bribery during the tender process for five office refurbishment contracts worth approximately £11.5 million and for one count of failure to prevent bribery amounting to £2.62 million. As a result, the companies agreed to pay a combined penalty of over £1.9 million and to pay back all profit obtained through bribery in the amount of £604,407.
Dewhirst, formerly of Bluu Solutions Limited, pleaded guilty on two counts of accepting bribes worth £291,000 as part of a tendering process to win office refurbishment contracts between 2014 and 2016 on behalf of the companies. The payments were characterized as "finder's fees" awarded to influence the outcome of the tender process. Dewhirst's guilty plea was subject to reporting restrictions at the time as it preceded a three-month trial that took place in January 2023 in which a jury acquitted three other connected individuals on bribery and money laundering charges relating to the same conduct. In this trial, the defendants were able to successfully argue that the fees paid were legitimate and commonplace within the industry, and following half-time submissions, the jury was directed to return not-guilty verdicts.
Dewhirst's guilty plea is significant given that the SFO has failed to prosecute individuals since the introduction of DPAs for corporations in 2014. However, it should be noted that Dewhirst pleaded guilty to receiving bribes, which differed from the criminal conduct of giving bribes as agreed to in the corporate DPA. Additionally, Dewhirst did not contest the proceedings against him. Although the SFO can consider its conviction of Dewhirst to be a success, it is clear that the prosecution of individuals following corporate settlements continues to be a challenge for the SFO.
Serious Fraud Office abandons case against G4S executives
On March 10, 2023, the SFO abandoned its case against three former G4S executives who allegedly defrauded the Ministry of Justice (MoJ) over a prisoner-tagging contract. Notwithstanding its success with respect to the guilty plea it secured against Roger Dewhirst, as discussed above, the collapse of this trial adds to a string of unsuccessful attempts to prosecute individuals following a corporate settlement as a result of disclosure failings.
The G4S executives were each charged in September 2020 with seven offenses of fraud in connection to false representations made to the MoJ between 2009 and 2012. The SFO's prosecution offered no evidence against the three individuals at a hearing at the Central Criminal Court in March 2023. Following a decades-long investigation, the SFO noted that it was no longer in the public interest to proceed with the case following an evaluation that the complex disclosure issues would take too long to resolve. The trial that should have taken place in 2022 had been pushed back by a year, but the SFO maintained that it would be unable to complete disclosure in time for a fair trial.
The failure to prosecute the three former executives follows a DPA entered into between the SFO and G4S in which the latter paid a financial penalty of £38.5 million and the SFO's full costs of £5.9 million, in relation to the aforementioned scheme to defraud the MoJ. The collapse of the case is one of many instances in which the SFO has been unable to follow through with its fraud charges against employees after entering into a DPA with a company. In 2021, the SFO failed to prosecute two former directors at Serco Geografix Limited, once again due to difficulties with disclosure, after the company had agreed to pay a £22.9 million fine as a result of the agreement.
In her keynote speech in September 2022, the SFO's Director, Lisa Osofsky, acknowledged that disclosure remains one of the SFO's biggest problems. While the subject of disclosure and whether it requires reform will remain at the forefront for some time, corporations that find themselves under investigation will undoubtedly think twice before entering into a DPA when it is clear that the SFO has thus far faced challenges in prosecuting the underlying criminal conduct.
Recent enforcement actions by the Financial Reporting Council for audit failings
On March 8, 2023, the FRC announced sanctions against PwC and two former audit partners for committing a number of serious breaches with regard to the statutory audits of Babcock International Group PLC (Babcock) and one of its subsidiaries.
The FRC's seven-week investigation concerned the audits of Babcock's accounts for 2017 and 2018, identifying breaches with respect to every area of audit investigated. This included a failure to follow basic audit requirements, showing a lack of competence, care, or diligence. For example, there was no evidence that the audit team had reviewed a €640 million contract written in French, as the audit team did not understand French, and neither did they obtain a translation. There was also evidence of repeated failures to challenge management and a general reluctance to do so. Several of the matters to which the breaches related were also found to be material to users of the financial statements.
As a result of the misconduct, PwC was fined £5.6 million, a discount from £7.5 million to account for PwC's early admissions. Non-financial sanctions also included an order requiring review and amendment of certain PwC training programs. The two former audit partners were also hit with financial sanctions of £150,000 and £48,750, respectively. PwC was ordered to pay the costs of the investigation.
The following month, KPMG was fined £875,000 for auditing and review failures with respect to its audit of Luceco PLC. Some of the breaches included failures in the design and performance of audit procedures, failures to adequately review and critically assess the audit evidence obtained, failures to document the audit work, and failures to apply professional skepticism. Once again, sanctions were also imposed against a former audit partner in the amount of £50,000.
The sanctions against PwC and KPMG follow a string of penalties that the Big Four have faced in the last two years, with PwC being sanctioned four times by the FRC since 2019. In March 2023, the FRC published its three-year plan as it prepares to transition into the Audit, Reporting and Governance Authority (ARGA) in 2024. Despite the delay in creating the ARGA, the FRC has already taken steps towards achieving the goals of the ARGA, releasing a draft "Minimum Standard for Audit Committees," as well as publishing guidance on professional judgment for auditors, evidencing the FRC's commitment to being an effective and transparent regulator.
FCA continues to flex its enforcement powers
In 2022, the FCA released its three-year strategy, which included a commitment to use its enforcement and intervention powers more actively and to push the boundaries where required. Last year, the FCA made a strong start to this mission, by doubling the number of fines it imposed in comparison to the previous year. Initial indications from the first quarter of 2023 show no signs of an enforcement slowdown.
So far this year, the FCA has issued two substantial fines, cumulatively totaling over £11 million. Both fines related to breaches of financial crime principles in the retail banking and wholesale banking sectors, respectively. We can expect significant further action by the FCA in the remainder of this year, given both the FCA's focus on enforcement and the large number of investigations the FCA has open. At the last count, in March 2022, the FCA had 603 ongoing investigations.
The focus on enforcement is also clear from key appointments made by the regulator in recent months. In March 2023, the FCA announced the appointment of Therese Chambers and Steve Smart as joint executive directors of its Enforcement and Markets Oversight Division. Chambers has worked at the FCA for more than 20 years, with most of that time spent in enforcement, and Smart joins from the National Crime Agency, with a strong enforcement background. In its announcement of the appointments, the FCA stated that the pair will support the FCA's ongoing transformation to become a "more assertive, more adaptive and innovative regulator."
As an example of this more assertive approach, the FCA recently signaled interest in flexing its enforcement powers in the relatively new area of ESG benchmarking. In a "Dear CEO" letter, published on March 20, 2023, the FCA said that its preliminary review of ESG-related disclosures showed a number of problems and warned that enforcement action may be warranted. This serves as a further example of the FCA's increased appetite for enforcement as a means of regulating the financial services industry.
However, these developments are not without their critics. The large number of live enforcement investigations has led to a significant increase in the time taken for investigations to conclude, which can leave firms and individuals waiting years for clarity on the outcome of their cases. It is possible that the further investment in the FCA's enforcement, as set out in its business plan, will seek to address this backlog. It is also possible that the FCA's recent announcement of the creation of a single legal function, bringing together the General Counsel Division and the Enforcement and Market Oversight team, will help work through the backlog by ensuring a consolidated legal capability across the organization.
For now, the message from the FCA seems clear — enforcement will remain a priority for the coming years, and observers should expect to see an uptick of activity in this area.
The UK Gambling Commission bares its teeth
Recent months have seen record fines announced by the UK Gambling Commission, targeting firms that have failed to comply with anti-money laundering (AML) requirements and failed to protect the interests of consumers.
On March 28, 2023, the Gambling Commission announced the largest fine in its history — a £19.2 million penalty for the William Hill Group for social responsibility and AML failings. This is the largest fine ever imposed by the regulator. Only a week prior to this, the Gambling Commission penalized two other operators, 32Red and Platinum Gaming, with £7 million in combined fines, also resulting from AML and social responsibility failings. In early 2023, the Gambling Commission announced a fine of £6.1 million on In Touch Games.
According to the Gambling Commission, the size of the fine levied against William Hill represents the severity of the breaches that occurred. The Gambling Commission found that William Hill was letting new clients place large bets without conducting the necessary due diligence. In one case, a customer was allowed to open a new account and spend £23,000 in 20 minutes, without any oversight being conducted. The regulator also pointed to serious AML failures, where customers were allowed to place large bets without the source of funds being confirmed. The failings were so egregious, the Gambling Commission stated, that a license suspension was considered.
The Gambling Commission's admission that a license suspension was considered, but not imposed, has led to criticism, with some querying what a large gambling company would have to do in order for its license to be suspended. The Gambling Commission has stated that, in order for a firm to have its license suspended, it would have to fail to cooperate with a review or be considered unsuitable to hold a license. Others suggest that what really holds the Gambling Commission back from flexing its full powers is the fear of being dragged into a costly legal battle. Although in the past the Gambling Commission has revoked licenses, these have belonged to smaller firms, who would unlikely have, or be willing to spend, the resources required in order to challenge the regulator's decision.
These fines, and the Gambling Commission's response, have reignited calls for reform of UK gambling regulation. A government white paper outlining proposals for reform was initially promised in 2019. After a number of postponements, the government published the white paper, "High Stakes: Gambling Reform for the Digital Age," at the end of April 2023. The white paper proposes new obligations for operators of online gambling sites to increase consumer protection, as well as further restrictions on advertising, sponsorship and branding and proposals for protecting children and young adults. Additionally, the white paper proposes strengthening the powers of the Gambling Commission to allow it to become a "more proactive regulator." Despite the period that this paper has been under development, many of the reforms proposed in the white paper are subject to further review and consultation, although the government expects these changes to the gambling sector to be implemented by summer 2024.
The combination of an active regulator looking to take enforcement action and the proposed introduction of significant new laws means that change is on the horizon in the gambling industry. Companies in the sector will need to consider closely their social responsibility and AML policies and procedures to ensure that they are able to justify their actions should they come to the attention of the Gambling Commission.
New "failure to prevent fraud" offense in the Economic Crime and Corporate Transparency Bill
In our last newsletter, we reported that the UK government had published the Economic Crime and Corporate Transparency Bill (the Bill), which seeks to reform the way in which economic crime is tackled, requiring greater transparency and reporting from corporate entities. Since then, the Bill has continued to build traction and is currently being considered in the House of Lords. While the proposed reforms are varied and wide-reaching, the proposed new "failure to prevent fraud" corporate offense is subject to much interest and one that we are following closely.
The new offense, announced on April 11, 2023, is an expansion of the "failure to prevent" model that places the onus on the company to implement controls in order to prevent crime within its organization and is currently only used for bribery and tax evasion offenses. Similar to these offenses, the organization must be able to demonstrate that it had reasonable prevention measures in place or risk an unlimited fine.
Small- and medium-sized enterprises will be exempt from the new offense, which is one example of how this offense differs from the bribery and tax evasion offenses. This is likely the result of the government having conducted a careful balancing act between the need for businesses to proactively prevent fraud and the potential burden such preventative measures may impose on businesses.
It is also of note that the proposed "failure to prevent fraud" offense limits corporate liability to fraudulent activity committed by employees of the organization, rather than by its "associated persons," as is the case with bribery and tax evasion. It is clear that the government will be focused on fraudulent activity that directly and solely benefits the company, rather than by associated entities which may act criminally in order to make individual gain, often by using the company as a vehicle through which to do so.
Under the Bill, the government is required to issue guidance to large corporations regarding what policies and procedures they will be required to have in place, ahead of the offense becoming law. Having considered the guidance with respect to measures required to prevent bribery and the facilitation of tax evasion, we can expect the guidance on the failure to prevent fraud to be similarly structured. Large corporations are likely to already have in place robust measures designed to detect and prevent fraud within the workplace, but these should be reviewed from a different lens once guidance is released to ensure they are responsive to evolving risks of fraud.
FCA publishes business plan for 2023/2024
In April 2023, the FCA published its business plan for the coming year, setting out how it intends to deliver on the second year of its three-year strategy. This strategy, initially published in 2022, focused on three themes: (1) reducing and preventing serious harm; (2) setting and testing higher standards; and (3) promoting competition and positive change. Within these themes, the business plan sets out a number of key commitments for the coming year.
One of these commitments is the reduction and prevention of financial crime. Over the next year, the FCA plans to increasingly use data-led approaches to act quickly to identify and close down firms or individuals carrying out financial crimes. The FCA also seeks to slow the growth in Authorized Push Payment fraud cases and to secure an overall reduction in financial crime by lowering the instances of money laundering through FCA-supervised firms. To achieve these goals, the FCA has committed to a number of new initiatives. These include using data more effectively to identify financial crime, increasing proactive assessments of anti-money laundering systems and controls, and ensuring appropriate oversight of firms' financial promotions, including those promoting cryptoassets, once they are brought within the FCA's remit.
Another key priority outlined in the business plan is market abuse. To provide effective deterrents, the FCA wants to ensure that firms and issuers are more resilient to market abuse and that appropriate sanctions are imposed on wrongdoers. With this in mind, the FCA intends to focus on prevention and compliance through better education for firms and to bolster its Enforcement Division through the creation of a new dedicated "non-equity manipulation" team, focusing on market abuse in the debt markets, and a new "interventions" team, which will take rapid action where immediate consumer harm is detected. To fund these plans, the FCA intends to increase the resources allocated to the Enforcement Division.
The business plan also includes a commitment to reduce harm from firm failure. This is particularly pertinent, given the recent volatility in the crypto market, the collapse of Silicon Valley Bank, and the current economic situation. The business plan outlines a number of ways the FCA plans to meet this commitment. One way is by introducing a new "regulatory return" requiring 20,000 firms to provide a baseline level of information regarding their financial resilience. A second way is developing FCA policies for cryptoassets, which will help develop standards for financial resilience in this sector. A third way is by identifying harm and acting to reduce it quickly through the use of data dashboards and other technology-led tools.
These commitments account for just three of the 13 commitments set out in the business plan, yet they demonstrate the breadth and depth of activity that the FCA has planned for the coming year. A common theme throughout the business plan is that the FCA intends to become a more proactive and fast-acting regulator and that a data-led approach will be key to helping the FCA achieve this.
Review of the whistleblowing framework
On March 27, 2023, the Department for Business and Trade announced that it would review the current whistleblowing framework in the UK. The review sets out to examine the effectiveness of the current framework in meeting its original objectives as implemented by the Public Interest Disclosure Act 1998 (PIDA), as well as subsequent legislative and non-legislative interventions.
With PIDA having been in force for 25 years, there is a risk that the UK's historically strong whistleblowing regime will be left behind when compared to other jurisdictions, particularly in the U.S. and Europe. Following the UK's departure from the EU, the EU has now implemented the Whistleblowing Directive, which the UK has not followed. As a result, this review is timely in order to confirm that the UK's whistleblowing framework is fit for purpose and remains in line with other jurisdictions.
Running alongside this review is the Protection for Whistleblowing Bill, which was introduced as a Private Members Bill from the House of Lords. Although it has not made much progress since its initial debate in December 2022, the bill sought to establish an independent Office of the Whistleblower in the UK in order to create offenses relating to the mistreatment of whistleblowers and to repeal and replace PIDA. While this review is ongoing, it is likely that the bill will not move forward, but it may indicate the future direction in which the government may head.
The government has set out three key topics which the review will focus on: (1) who is covered by whistleblowing protections; (2) the availability of information and guidance for whistleblowing purposes; and (3) how employers and prescribed persons respond to whistleblowing disclosures, including best practice. Key considerations include how the current framework facilitates disclosures and protects workers, the accessibility of whistleblowing information, and the wider benefits and impacts of the whistleblowing framework. The definition of "worker" for the purposes of whistleblowing protections will also be reviewed.
The outcome of the review is anticipated in autumn 2023, but businesses should anticipate recommendations for a more stringent whistleblowing framework and should reflect on their policies and procedures to ensure that they facilitate an open working environment where employees feel comfortable to speak out.
Updates on the regulation of cryptoassets
In February 2023, the Treasury published a consultation paper, setting out proposals for the future regulation of cryptoassets. The paper sets out the government's "core design principles" for a regulatory regime for cryptoassets, a key tenet of which is "same risk, same regulatory outcome." This means that the government will seek to put in place equivalent or similar safeguards that exist for traditional financial instruments, where cryptoassets present similar risks. The government has therefore discounted the option of creating a fully bespoke regulatory regime for cryptoassets on the basis that this would not deliver a level playing field between crypto and traditional financial services firms conducting the same activities.
Instead, the consultation paper proposes to include the regulation of cryptoassets within the regulatory framework established by the UK's Financial Services and Markets Act 2000 (FSMA). The government plans to do this by expanding the list of "specified activities" in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to include cryptoassets. If implemented, this would mean that, regardless of the type of cryptoasset, it will have the potential to be regulated by FSMA if specified activities are performed in relation to it. The principle of "same risk, same regulatory outcome" is also applied in relation to market abuse, where the consultation paper proposes extending the UK market abuse framework to cover exchange-traded cryptoassets. That said, in recognition of the unique risks associated with cryptoassets, under the new proposals the FCA will be granted the power to make crypto-specific rules. However, this power will be consulted on at a later stage.
These proposals, which the government refers to as "phase 2" of its plans to regulate the crypto sector, build on initial regulatory proposals announced last year. Those "phase 1" proposals included plans to regulate fiat-backed stable coins as part of the Financial Services and Markets Bill, as well as plans to regulate the promotion of certain types of cryptoassets. The government has asked for feedback on its latest proposals by April 30, 2023, after which it will consider the responses and decide on next steps.
Along with moving forward with the regulation of cryptoassets, the government is also investing in enforcement of crypto-related crimes. In January 2023, the National Crime Agency announced the creation of a new "Crypto Cell," which will be tasked with proactively investigating cryptocurrency-related crime and providing assistance for ongoing and future investigations where expertise with cryptocurrencies is required. To begin with, the Crypto Cell will consist of five officers working out of the Cyber Crime Unit of the National Crime Agency.
These developments take place against a backdrop of continuing volatility in the cryptocurrency markets. The total global market capitalization of cryptoassets currently sits at around US$0.8 trillion, having fallen around 75% from a peak of around US$3 trillion in November 2021. The recent failure of crypto exchange FTX also had widespread implications for the global cryptoasset market and raised serious concerns about operational resilience and market conduct in the crypto sector. These issues serve as a reminder of the risks associated with cryptoassets and underscore the need for effective regulation in this area.
Updates on sanctions against Russia
February 24, 2023 marked the one-year anniversary of Russia's invasion of Ukraine. This milestone provided an opportunity for countries to restate their commitment to isolating Russia and eroding Russia's means of waging war.
The UK government marked the anniversary by announcing a new package of sanctions targeting Russia. These include: (1) export bans on every item Russia has been found using on the battlefield to date; (2) import bans on 140 goods, including iron and steel products processed in third-party countries; (3) the extension of existing measures against Crimea and the non-government controlled areas of Donetsk and Luhansk to the non-government-controlled areas of Kherson and Zaporizhzhia; (4) the addition of 80 individuals to the UK sanctions list; and (5) the addition of 12 Russian entities to the UK sanctions list. Among the additions to the UK sanctions list are four banks, senior executives from Russian state-owned company Rosatom, and executives from Russia's two largest defense companies.
At an international level, the anniversary of the invasion saw the G7 leaders issue a joint statement, reaffirming their commitment to strengthening the sanctions the G7 have taken against Russia to date and presenting a united front through the imposition of coordinated economic sanctions. Among the new measures announced by the G7 was the creation of an "Enforcement Coordination Mechanism" to bolster compliance and enforcement of sanctions and deny Russia the benefits of G7 economies.
Beyond the announcements on the anniversary of the invasion, the UK has continued to enhance its Russian sanctions regime since we published our last update in December 2022. For example, legislation has been introduced to implement the prohibitions on the provision of IT consultancy services, architectural services, engineering services, advertising services, transactional legal advisory services, and auditing services, which were announced by the government last year. In addition, in March 2023, the UK government announced a £50 million Economic Deterrence Initiative to strengthen the implementation and enforcement of UK sanctions. This investment is intended to tackle sanctions evasion, prepare the government for future scenarios where the UK may need to respond to hostile acts, and fund more security-cleared analysts to ensure that future sanctions measures are more precise and have greater impact.
The anniversary of the invasion also provides an opportunity to reflect on the effectiveness of the Russian sanctions imposed over the last year. The UK government has announced that UK goods imported from Russia have fallen by 99% and goods exported to Russia have fallen by nearly 80% since before the invasion. However, the European Bank for Reconstruction and Development (EBRD) is slightly less optimistic, noting that what they are seeing is a change in trading patterns, whereby businesses that do not want to be seen doing business with Russia are trading with others, with those others then re-exporting to Russia. For example, the EBRD has noticed a significant increase in exports to Russia from Türkiye and China. The EBRD predicts that, although the sanctions are having an impact, it will take years for their full effect to become apparent.
What is clear, one year after the initial invasion, is that the UK remains committed to bolstering its sanctions regime. While the roll out of new sanctions may have slowed down from the flurry seen last year, the UK appears to be shifting its focus to implementation and enforcement to ensure that the sanctions it does impose have the desired impact, even if that impact is not fully realized for a number of years.
Continued calls for improvements in diversity and inclusion in the financial sector
Since April 2022, the FCA has set positive diversity targets for listed UK companies to include quotas on women and individuals from an ethnic minority in senior roles. Firms are required to report information with respect to their efforts towards these targets and if they have not been met, firms must explain why not. In its ongoing efforts to improve diversity, equity and inclusion (DE&I) across the UK's financial sector, the FCA is shortly expected to publish draft rules for all regulated firms to abide by in order to accelerate meaningful change.
It was reported in March 2023 that some of the UK's largest listed companies had fallen short of the FCA's targets. While we do not anticipate that the FCA will make this a matter for enforcement, it highlights the fact that firms that do not prioritize DE&I at senior levels are at risk of public scrutiny.
The FCA has for some time recognized that, as a market regulator, it should set a clear tone from the top. In recognizing that it has an ongoing role to play in improving DE&I, the FCA has set its own diversity targets to reflect the communities and consumers it protects. In addition to the various strategic goals set out in its 2023/2024 business plan, as discussed above, the regulator has noted that it is making significant progress towards its own diversity target and continues to hold itself accountable through its annual reports on diversity.
The rules for regulated firms are likely to center around data-gathering, reporting, and internal audits in order to better inform the scope of further work that is required. Given that the current targets for listed companies focus on gender and ethnicity, it will be interesting to see whether the rules set out expectations with respect to other areas of diversity.
BEIS releases guidance for employers on ethnicity pay and reporting
Further to a report released on race and ethnic disparities in the UK in 2020, the government published its response, "Inclusive Britain," in which it committed to issuing guidance to support employers to take meaningful action to address issues that had been identified. In April 2023, the government released guidance aimed at helping businesses identify pay gap figures among ethnic groups in the workforce in order for the business to investigate, understand, and then take measures as required to address such gaps.
Although large employers in the UK have been required to publish gender pay gap figures since 2017, the decision to publish ethnic pay gap figures will remain voluntary. One of the reasons for this, as recognized by the government, is the specific complexities around gathering data of this kind. While gender reporting requires a comparison between two groups, employers would have to assess how to gather data across various ethnic groups in order to produce reliable statistics. Employers would then have to conduct careful scrutiny of the data in order to draw meaningful conclusions and where gaps are identified, to understand the underlying causes. The guidance provides practical pointers in order to help employers take these steps. Interestingly, one of the steps suggested is for the employer to publish a clear action plan internally to identify ethnic pay gaps, which may help to foster a sense of fairness and inclusion among the workforce.
The guidance recognizes that, while the UK's workforce is becoming increasingly diverse, more work is required in order to remove barriers and ensure fairness for all ethnic groups. As ever, such initiatives are best addressed when they are data-led in order to develop a practical, informed action plan to create meaningful change. Although reporting this data will not be mandatory, the government's guidance is a further step in the right direction, likely to encourage companies to reflect on their own practices to determine if more can be done to promote a diverse workforce.
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