Regulator 'received three warnings about collapsed foreign currency firm'

Collapsed foreign currency firm Crown Currency Exchange was reported at least three times to City regulators before it failed owing more than £16m, it was reported yesterday.

The Financial Services Authority (FSA) received three warnings over the company dating back to 2006, including one from Cheshire Police, according to a Sunday newspaper.

In correspondence reportedly seen by the newspaper, the FSA is revealed to have decided to drop the complaints either because Crown Currency did not fall within its remit or due to insufficient evidence.

Crown Currency went bust in October, leaving more than 8,000 victims out of pocket - some losing between 100,000 and 400,000 each.

It emerged after the firm went bust that it was not regulated and therefore not covered by FSA compensation schemes – meaning customers cannot recover their cash through the FSA.

Two men were arrested and released on bail last week by detectives investigating the collapse of Crown Currency.

The firm did not come under the remit of the FSA as foreign currency exchanges are not automatically regulated.

But Crown was able to register at the FSA and therefore carry the regulator's logo on its website and marketing literature, despite not being authorised.

FSA chief executive Hector Sants admitted to MPs in a hearing late last month that there was consumer misunderstanding over the difference between registration and authorisation.

He revealed the FSA was now in talks with the Treasury over possible rule changes to tighten supervision of companies such as Crown.

It is also looking at whether to prevent unauthorised firms from publicising the fact they are registered.

The newspaper reported that one of the complaints made to the FSA over Crown was made by Cheshire Police in 2006, followed by an anonymous complaint in August 2009 and a letter in January from an employee in a rival foreign exchange company. The FSA reportedly referred the matter to its unauthorised business team in the enforcement division, but concluded: "In all three cases, in our judgment, there was insufficient evidence to take supervisory action."

Crown Currency, based in Hayle, Cornwall, allowed customers to pre-order foreign currency at today's prices up to a year in advance. It was set up in 2004 by husband and wife team Peter and Susan Benstead.

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