LONDON, Jan 31 - Britain's financial regulator has slapped a record fine on leading City financier Ravi Sinha for an invoicing scam when he was in charge of the European operations of U.S. buyout giant JC Flowers.

Former Goldman Sachs banker Sinha was one of JC Flowers' leading lights, spearheading attempts to buy stricken bank Northern Rock and insurer Friends Provident, but he admitted to the fraud after hitting financial trouble.

The Financial Services Authority (FSA) on Tuesday fined Sinha 2.87 million pounds, its largest penalty for a general fraud case.

Sinha was paid $1.2 million (760.7 thousand pound) a year -- at least on a par with many of the country's leading business figures -- but ran up debts after making his own investments in JC Flowers deals, and borrowed nearly 9 million euros $11.80 million during just 3 months in 2008.

Sinha was one of the key right-hand men of Christopher Flowers, whose private equity firm made billions from turning around troubled banks, including some controversial deals. But Sinha's financial woes deepened when the credit crisis struck and the performance of JC Flowers's investments fell and income from those investments dried up.

Sinha has to repay 1.37 million pounds he pocketed from concocting fraudulent invoices between April and October 2009 and was fined 1.5 million pounds by the FSA. It also banned him for life from working in the regulated financial services industry.

Sinha exploited his position of trust as CEO to fraudulently obtain significant sums for his personal benefit, said Tracey McDermott, acting director of enforcement and financial crime at the FSA.

He engaged in a dishonest, deliberate and sustained course of misconduct which lasted for several months. Such behaviour has no place in the financial services industry, she said.

Sinha did not return calls for comment.

The City of London Police said it looked at the fraud and decided not to pursue criminal proceedings.

Sinha was reported to the FSA by Callum McCarthy, the regulator's former chairman, according to a report in the Sunday Times in April 2010.

McCarthy joined JC Flowers as chairman of its European business just days before the fraud was uncovered. The Sunday Times said the probe related to the attempted float of a Luxembourg-based wealth management firm the firm owned.

JC Flowers immediately investigated the situation, suspending and then terminating Sinha's employment. The FSA has made no criticism of the group's conduct, it said in a statement.

(Reporting by Simon Meads and Steve Slater; Editing by Jon Loades-Carter and David Holmes)