As the financial services industry navigates an era of heightened scrutiny, a new front in governance and compliance is emerging: the battle against non-financial misconduct. Behaviors such as harassment, bullying, and discrimination — once considered peripheral issues — are now at the center of regulatory and reputational risk. These actions not only tarnish institutions' public standing but also disrupt operations and erode the trust essential to the financial system’s stability.
In the U.K., a confluence of factors has brought these issues into sharper focus. The Worker Protection Act, which took effect in October and mandates that employers take proactive steps to prevent sexual harassment in the workplace. This new law underscores the growing urgency to tackle pervasive misconduct across industries, particularly in finance.
Meanwhile, the U.K. Treasury Committee's “Sexism in the City” inquiry highlighted how deeply entrenched these issues remain. Testimonies from over 40 women revealed persistent sexism, bullying, and harassment in the financial services sector, even as diversity initiatives have become more common. And a recent report from the U.K.’s top financial regulator, the Financial Conduct Authority, showed that workplace complaints about bullying, discrimination, and sexual harassment in the financial sector rose by 72% between 2021 and 2023.
Regulators, firms, and industry leaders are beginning to confront a sobering reality: addressing non-financial misconduct is no longer a moral imperative alone — it is a business necessity.
Lloyd’s of London Takes the Lead
Lloyd’s of London, a historic insurance marketplace with 380 brokers and a network of 4,000 insurance professionals, has already been working to improve its culture by addressing unprofessional behavior. In 2022, it issued a £1 million fine to a market firm for failing to address complaints about a “systematic campaign of bullying,” alongside issues of heavy drinking and sexual harassment.
Now, Lloyd’s is taking a more proactive role in combating non-financial misconduct. In September, it introduced the Lloyd’s Market Conduct and Behaviours Framework, designed to help firms identify and correct behavioral issues. The framework applies to brokers and insurance professionals under the Lloyd’s umbrella and outlines more than a dozen forms of impermissible conduct, such as bullying, harassment, whistleblower intimidation, and inappropriate behavior stemming from alcohol use.
The framework emphasizes that Lloyd’s doesn’t need to demonstrate institutional harm for misconduct to be actionable. Behaviors like illegal drug use, bullying, or harassment are inherently unacceptable and subject to action, even if they occur in social or non-professional settings connected to the Lloyd’s market.
While policies like these are critical, they’re only part of the solution. Lloyd’s acknowledges that cultural transformation requires sustained effort. By integrating advanced tools like Reflect AI, the framework’s impact could be significantly amplified. AI-driven systems can monitor communications for patterns of misconduct, provide early warnings, and offer actionable insights — helping firms address risks before they escalate.
Why This Matters: Lessons from Recent Scandals
The importance of addressing non-financial misconduct is clear from the fallout of recent scandals. In the U.K., hedge fund manager Crispin Odey faced multiple sexual harassment allegations, leading to his removal and the closure of his firm, Odey Asset Management, which once managed $12 billion in assets.
In the U.S., the FDIC was investigated for enabling a toxic workplace culture rife with sexual harassment and misogyny. High-profile financial institutions have also faced costly settlements for workplace misconduct:
Goldman Sachs paid $215 million to settle a gender bias class-action lawsuit involving 2,800 female plaintiffs.
Citigroup paid $26 million in fines and restitution for discriminatory lending practices.
Bank of America Merrill Lynch settled various racial, gender, and religious discrimination cases for nearly $200 million.
JP Morgan Chase agreed to pay $365 million in settlements for maintaining ties with Jeffrey Epstein, a convicted sex trafficker.
These examples underscore that ignoring non-financial misconduct isn’t just a reputational risk — it’s a business risk that can significantly impact the bottom line.
Looking Ahead
Lloyd’s framework is a step in the right direction, but its potential could be fully realized through the integration of AI-driven tools. By combining robust policy reform with cutting-edge technology, organizations can foster workplaces where respect and accountability are the norm. For industries like finance and insurance that depend on trust, integrity must be the foundation.
Amanda Nurse is the editorial and operations coordinator at Alphy.
Reflect AI by Alphy is an AI communication compliance solution that detects and flags language that is harmful, unlawful, and unethical in digital communication. Alphy was founded to reduce the risk of litigation from harmful and discriminatory communication while helping employees communicate more effectively. For more information: see www.alphyco.com