TTF Blog: 01 February 2021

Duty of care mooted amid condemnation of watchdogs

Baroness Kramer is one of the peers proposing a 'duty of care' under Law

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

While MPs take investigative evidence today on the London Capital and Finance (LCF) scandal – which at £237m in losses to consumers, might be the biggest fraud on the investing public in recent memory –  peers in the House of Lords, are proposing to use the Financial Services Bill to force the U.K.’s financial regulator to make rules on a ‘duty of care’ in financial services.

Baroness Kramer and Lord Sharkey suggest amending the draft law to say that the regulator “must make rules in accordance with section 137CA (FCA general rules: duty of care) of the Financial Services  and Markets Act 2000” if enacted, within six months. Such an amendment “would impose on financial services providers a general duty of care to their clients.”

That debate will be important, because the watchdog appears to have dragged its feet on Duty of Care before – it has announced consultations on it in recent years, but has not actually concluded them. It is also under deep scrutiny from a litany of victims, and many of their MPs, on its failure to “effectively supervise and regulate” to protect the public and even vulnerable people. Lawyers for LCF victims recently told a court how even people on state benefits were successfully hooked into the scam via misleading promotions, while the regulator failed to act.

An attempt to enshrine customer care into law is only the latest attempt by Lord Sharkey and other peers to raise the legal and political profile of consumer protection (he brought a Private Members’ Bill on ‘Duty of Care’ in the past). Will it fall on deaf ears this time?

At a Transparency Task Force symposium last week, members with experience of fraud and whistleblowing made it very clear that protecting the public needs to be put at the heart of watchdogs’ activities.

‘Fundamentally Complicit Authority’

British investigative publication Private Eye has mocked the FCA as the ‘fundamentally complicit authority’ pretty much since its inception. For many victims, unfortunately, that is far from satire. One of the LCF victims told us that from their perspective the FCA supported this Ponzi scheme by actually granting FCA authorization. The Dame Gloster review covers how mini-bonds were misleadingly marketed by LC&F.  Many victims were even told the bonds were ISA-eligible.

Connaught victims’ rep says Raj Parker’s report did not go far enough

Mark Bishop, who represents victims of another financial scandal, the Connaught scandal, told how the FCA – very far from engaging with consumer concerns – have never even allowed him to give a brief presentation to them on lessons to be learned after red flags emerged more than a decade ago. He called for regulators to have ’empathy briefings’ for their staff from victims financial crime and misconduct. He also argues that the FCA did not act in consumers’ interests during the Connaught scandal: “was the regulator really just negligent? … In the Connaught case, you can read the report [by Raj Parker]: Eight years, not once did they do that.” On being slow to act, he also referred to a more recent example in a different case where investors lost a lot of money: “the Guernsey Stock Exchange tried to contact the FCA to tip it off about Woodford trying to list some of its unlisted stocks … and it tried to make contact several times in April of 2019 and only got a call back on the eighth of May. Now that’s a regulator and a crown dependency. Imagine what happens if you’re a consumer or an individual whistleblower.”

‘not actually monitoring anything’

Pauline Creasey, chair of the Premier FX liquidation committee, told last week’s Symposium: “Our fraud was discovered in July 2018. … it’s been absolutely shocking what we’ve learned about the FCA failings just on our case, because we were not an investment fund … we were just payment service users.” – as Sky news previously reported, Pauline herself lost almost £500,000. She said: ‘the FCA has now admitted that they were not actually monitoring anything that this payment service company did for eight years, eight years, okay, and kept reauthorizing them without doing any checks on what was going through the banks; turned out they were doing huge money laundering. The thing went pear shaped, it was a Ponzi scam.’

Bank forgery whistleblower says Bailey ignored him

Perhaps the most shocking point was made by whistleblower Mark Wright at last week’s event. He now leads campaigning organisation Bank Confidential and explained “I disclosed to Mr. Bailey, when he was the CEO of the FCA, the name of the signature forgery trainer in the RBS group…”

Damningly, as far as Wright could determine, Bailey ‘did nothing with that information’. The scandal ‘was on the front page of the Mail on Sunday, a year after I actually gave him the name of the signature forgery trainer in corporate and commercial. And never even got a whistle-blowing reference number. That’s just one example.’

Following on from Dame Gloster’s evidence to MPs today, Bank of England governor Andrew Bailey will soon be in front of the Treasury Committee to give evidence on how the FCA handled the London Capital and Finance scandal – in effect being cross-examined on his previous job, when he was leading the FCA. Will he be questioned more widely on intelligence-handling?

There were, in fact, so many interesting speakers at last week’s event and I haven’t had time to pull out quotes from them all, as I juggle this blog around parenting. Exactly as Mark Wright explained – ‘that’s just one example’ – we could go on.

Scrutiny for vulnerable consumers

The City watchdog – which had a total group income of more than £632,000,000 last financial year, was most recently called to account on consumer care by Stephen Timms, chair of the Pension Scams Inquiry that Transparency Task Force campaigned for. Timms asked Mark Steward, the FCA’s Head of Enforcement: “The FCA has consulted a number of times on the idea of a duty of care … putting that into regulations. That has not happened yet. Why has it not been done?”

Steward clarified that this has not even been fully consulted on: “We are working on it now. I think there were some delays last year because of all that was happening in the world last year, but we are focused on producing something in the early part of this year for consultation.” 

'Unexplained Wealth' and suspicious activity under scrutiny

Last week. Graeme Biggar of the National Crime Agency accounted to MPs on what UK law enforcement are doing about fraud and moneylaundering, being particularly frank on why it is that only between 1 and 3 per cent of frauds actually get investigated. “the UK financial intelligence unit needs a substantial increase in its resources” he said, and  – regarding money-laundering in particular – “the suspicious activity reporting regime needs to be modernised and reformed.”

Much of MPs’ scrutiny focuses on the FinCEN files leaks of suspicious activity reports to investigative journalists. Biggar said “Twenty years ago, we got 20,000 suspicious activity reports in, largely from banks. This year, we would not be surprised if we got three quarters of a million, and the number of defence against money laundering SARs, where we are told in advance and given the option to refuse permission to proceed, is going to double, we think, this year. The sheer volume coming through is really significant and very hard to deal with.” The difficulty is in separating the important reports,  where there might be really massive levels of financial crime taking place, from the unimportant ones. Biggar said that a ‘failure to prevent’ offence for economic crime would, in his view be particularly useful to make a wide range of industries more vigilant against economic crime, suggesting this might be particularly effective against major fraud.

UK’s first ‘unexplained wealth order’ approved by Supreme Court

Biggar rightly emphasised to MPs that ‘we won in the Supreme Court recently on the very first unexplained wealth order’ – this is a significant news story I missed. As National Law Review reports, Zamira Hajiyeva, wife to the former chairman of the International Bank of Azerbaijan will now, despite her legal challenges, have to provide a “clear account” of the source of her spending, which includes purchases totalling just over £16.3 million spent in Harrods over the course of ten years 
, £10.5 million
 on a golfing resort, and $42 million on a Gulfstream G550 jet.

As this initial order has succeeded, it opens the door to more high profile cases. Scottish MPs are now set to vote on whether the Scottish Government should pursue an Unexplained Wealth Order to investigate the source of financing for former US President Donald Trump’s Scottish resorts.

Press Timeline of relevant articles:

25 Jan 2021FCA urges clients of collapsed British Steel firm to consider claims by Sonia Rach for MoneyMarketing

22 Jan 2021HSBC chiefs to face MPs’ questions over Hong Kong protesters’ frozen accounts by Poppy Wood for City AM

21 Jan 2021MPs call on FCA to ‘hold bad advisers to account’ by Laura Purkess for CityWire

21 Jan 2021FCA told it lacks vision to tackle consumer issues by Amy Austin for FT Adviser

20 Jan 2021 Mortgage Prisoner amendments blocked by Treasury, by Suleman Baig for Quadrin Group

18 Jan 2021Former Hong Kong lawmaker rejects HSBC’s explanation over frozen accounts by Reuters

18 Jan 2021Supreme Court Rejects Appeal to Overturn UK’s First Unexplained Wealth Order by National Law Review

18 Jan 2021British Virgin Islands’ governor launches inquiry into alleged corruption by Patrick Wintour for the Guardian

18 Jan 2021What we learned from a bumper FCA data dump by Justin Cash for MoneyMarketing

18 Jan 2021Wall Street fears bubble from Biden stimulus as retail investing booms by Katherine Greifeld, Claire Ballentine and Vildana Hajric for

17 Jan 2021Bobby Kennedy was right: GDP is a poor measure of a nation’s health by Larry Elliott for the Guardian

15 Jan 2021 –  Mortgage prisoners accuse Treasury of working against them as wider FCA remit blocked by Owain Thomas for Mortgage Solutions

14 Jan 2021MP Vows To Keep Pushing Tougher Economic Crime Law by Richard Crump for Law360

13 Jan 2021Mortgage prisoner finance bill amendments struck down by Gary Adams for Mortgage Strategy

12 Jan  2021 – Hong Kong families with money trapped in closed law firm’s frozen bank accounts turn to government for low-interest loans by for South China Morning Post

12 Jan 2021 – Bitcoin: be prepared to lose all your money, FCA warns consumers by Kalyeena Makortoff  for the Guardian

11 Jan 2021Insolvency firms put under investigation after scandals, by Louisa Clarence-Smith for the Times

07 Jan 2021 Regulators and police say Covid lockdowns have driven up online pension scams and demand regulation of Google, Facebook and others by Jim Armitage for the Evening Standard

06 Jan 2021 Why UK savers could fall through the cracks in Brexit regulation from the FCA by Jim Armitage for the Evening Standard

04 Jan 2021Bank of England fails to publish officials’ expenses by Alex Ralph for the Times

03 Jan 2021Five years on and still no answers over HBOS affair by Jill Treanor and Liam Kelly for Sunday Times

31 Dec 2020So, when WILL we learn truth about bank chiefs? Another year and still no sign of key HBOS probe by Lucy White for the Mail

24 Dec 2020ASIC drops investigation into Westpac, by Investor Daily in Australia

21 Dec 2020Financial Conduct Authority fines just ten wrongdoers this year by Patrick Hosking in the Times

19 Dec 2020 Andrew Bailey could return to face MPs after damning report on London Capital & Finance scandal by Ben Martin & Patrick Hosking for the Times

18 Dec 2020Google urged to vet online financial promotions better by Huw Jones for Reuters

18 Dec 2020Financial Conduct Authority insiders warned of London Capital & Finance-style minibonds in 2013 but nothing was done by Jim Armitage for the Evening Standard

18 Dec 2020Blue Gate escapes $13.5 million Connaught fund fine from FCA by Huw Jones for Reuters

18 Dec 2020Executives at Financial Conduct Authority to lose bonuses over London Capital & Finance scandal by Ben Martin for the Times – Bosses at the Financial Conduct Authority will lose £205,000 in bonuses after the highly critical report on the regulator’s handling of the London Capital & Finance scandal

17 Dec 2020The fallout from the financial regulator’s shocking failure on LC&F is not over yet by Nils Pratley for the Guardian

17 Dec 2020FCA did not ‘effectively supervise’ collapsed mini-bond issuer LCF, says report by Matthew Vincent for the Financial Times  “Members of the Transparency Task Force, a lobby group pushing for regulatory reform, pointed out that in his own representations to the Gloster review, Mr Bailey included a demand “to delete references to ‘responsibility’ resting with specific identified/identifiable individuals”.

17 Dec 2020Former Financial Conduct Authority boss Bailey apologises over handling of mini-bond scandal by Ben Martin for the Times

16 Dec 2020EU cannot be ‘captured’ by City of London, warns financial services chief by Sam Fleming and Jim Brunsden for the Financial Times

16 Dec 2020Treasurer plots ASIC shakeout by John Kehoe for Financial Review

15 Dec 2020How to remake Australia’s lame corporate watchdog by Pamela Hanrahan for Financial Review

08 Dec 2020MPs call for £2.6bn Equitable Life compensation by Adam Williams for the Telegraph

03 Dec 2020HMRC ‘treat the victims of pension scams like criminals’: Taxman has benefited from the ‘proceeds of crime’ MPs are told by Tom Kelly for Daily Mail

25 Nov 2020FSCS seeks extra £92m in interim levy by Daniela Esnerova for MoneyMarketing

25 Nov 2020  – Trump Administration Targets Banks Divesting From Fossil Fuels In New Anti-Climate Rule by Sharon Kelly for DeSmogBlog

23 Nov 2020Bank of England policymaker warns of ‘pandemic hangovers’, as private sector shrinks – as it happened by Graeme Wearden for the Guardian

16 Nov 2020 – Bank of England ‘failing’ on climate change reform by Philip Aldrick for the Times

16 Nov 2020 – Fed moves closer to joining global peers in climate-change fight by Ann Saphir for Reuters

14 Nov 2020Fraudsters will exploit Covid vaccine to con vulnerable, warns National Crime Agency by Charles Hymas for Telegraph

09 Nov 2020Ombudsman inundated with complaints about loans by Katherine Griffiths for the Times

09 Nov 2020Spike in personal pension cases at ombudsman by Rachel Mortimer for FT Adviser

09 Nov 2020 – Regulator: Climate risk ‘looms even larger’ than pandemic by Avery Ellfeldt for ClimateWire (U.S.)

08 Nov 2020How financial services watchdog has reacted to UK consumer worries in Covid by Hilary Osborne for Guardian

08 Nov 2020Five predictions for banking regulation in a Biden presidency by Jon Hill for Law 360

05 Nov 2020Martin Lewis warns of ‘epidemic of scams’ after ICU nurse loses £8,000 by Scott Edwards for Wales Online

05 Nov 2020FCA bans adviser trio jailed for sex offences by Rachel Mortimer for FT Adviser

03 Nov 2020 – ‘We haven’t received a penny’: Business interruption insurance row intensifies as owners fear payout delays, by Elizabeth Anderson for iNews

03 Nov 2020Aviva’s shares fiasco highlights weakness of the city watchdog by Patrick Hosking for the Times

02 Nov 2020Banks have done little to help the country through the pandemic, so why is the government rewarding them? by Simon Youel for the Independent

29 Oct 2020 – Calls to sack Malta financial regulator CEO by Cristian Angeloni for International Adviser

27 Oct 2020U.S. group urges Biden to use financial regulation to control climate change by Valerie Volcovici for Reuters

27 Oct 2020 ‘Impact startups’ continue to raise funding during the pandemic despite difficulties faced by the wider tech startup sector by Sebastian Klovig Skelton for Computer Weekly

26 Oct 2020 – Why there must be thorough probe of claims made by Bank Signature Forgery Campaign – Greg Wright  for the Yorkshire Post

26 Oct 2020 –  Critics demand action over ‘flawed’ British Banking Resolution Service by James Hurley for the Times

24 Oct 2020Banks look to debt collectors to recover bounce back loans by Nicholas Megaw, Stephen Morris and Daniel Thomas for the FT

23 Oct 2020Bank Signature Forgery (film) by Nicholas Wilson for Corruption UK

22 Oct 2020 – UK fraud agency suffers string of senior departures by Kate Beioley for the FT

22 Oct 2020 HSBC froze £1.5bn of customers’ cash in ‘dormant accounts’ – report by Kalyeena Makortoff & Juliette Garside for the Guardian

22 Oct 2020Work harder to find fraud, watchdog tells auditors by James Hurley for the Times

17 Oct 2020 – MPs pursue claims bank signatures were faked on court papers by Rupert Jones for the Guardian

16 Oct 2020 We need universal digital ad transparency now by Laura Edelson, Erika Franklin Fowler and Jason Chuang for TechCrunch

15 Oct 2020 – Rising COVID-19 Rates Send NatWest Misselling Trial To Video by Bonnie Eslinger for Law 360

15 Oct 2020 – MPs Push Agencies to Act on Forged Signature Claims by Law360

13 Oct 2020 –  Mark Carney says banks should link executive pay to Paris climate goals by Kalyeena Makortoff for the Guardian

12 Oct 2020 ‘It is time to reboot the competition regime for the modern, digital age’ by David Wighton, The Times

12 Oct 2020 Gina Miller blasts FCA complaints scheme changes ‘unfair, immoral and illegal’ by Cristian Angeloni for Portfolio Adviser

12 Oct 2020MPs call for input on Pension Schemes Bill by James Phillips for Professional Pensions

10 Oct 2020 Give pension trustees power to fight scammers, say MPs by Kenza Bryan for the Times

08 Oct 2020  – Freedom to transfer pensions should be stripped where scams are suspected, industry experts urge by Jessica Beard for the Telegraph

08 Oct 2020 – Planned pensions shake-up passes first Commons hurdle by Law 360

08 Oct 2020 – WPC chairman says transfer rules ‘must be changed’ by Amy Austin for FT Adviser

07 Oct 2020 – Tech giants share blame for pension scams, MPs told by Law 360

06 Oct 2020 – FCA opens 85 cases over pension scam concerns by Amy Austin for FT Adviser

03 Oct 2020 – Record number of savers fall victim to investment fraud as scam adverts stay on Google by Andrew Ellson for The Times

02 Oct 2020A New Theory of Soil by Alex Varley-Winter for SustainAct

28 Sep 2020 – PM urged to show leadership in fight against scams by Amy Austin for FT Adviser
28 Sep 2020The 100 Whistleblowers who changed Wall Street by Stephen M. Kohn and Mary Jane Wilmoth for National Law Review
28 Sep 2020TTF calls for govt leadership on pension scams following meeting with PM by Sophie Smith for Pensions Age
26 Sep 2020 – £60m revamp for Action Fraud hotline that failed victims by Martin Beckford for The Sunday Times
25 Sep 2020 – FCA labels Google’s scam advert efforts ‘deeply frustrating’ by Rachel Mortimer for FT Adviser
23 Sep 2020 – Bank Forgery Campaign (video) by Andy Verity for BBC
20 Sep 2020 – Explore the FinCEN Files Data and Suspicious activity reports, explained by the International Consortium of Investigative Journalists (ICIJ); Fergus Shiel and Ben Hallman
21 Sep 2020 Flood of complaints expected over Covid-19 UK business loans, by Kalyeena Makortoff for the Guardian
16 Sep 2020 – Regulators Accused of Ignoring Scam Warnings by Jack Gray for Pensions Age
16 Sep 2020Tougher clampdown on pension scams is needed, MPs told by Vicky Shaw for Belfast Telegraph
11 Sep 2020 – ‘Delay changes to Watchdog Complaints Scheme’ by James Hurley for The Times
03 Sep 2020Regulators have not yet got to grips with how to close down crooks, warns TTF  by Hope William-Smith for Professional Pensions

24 Aug 2020Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times

04 Aug 2020Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions

03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money

01 Aug 2020‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph

31 Jul 2020 ‘Common sense’ prevails as pension freedom withdrawals fall 17% — But drop is expected to be ‘a short-term blip’ by Robbie Lawther for International Adviser

31 Jul 2020HMRC figures show plunging pension freedom withdrawals by Hope William-Smith for Professional Adviser

28 Jul 2020MPs launch inquiry into pension scams  by Tom Kelly for Daily MailUK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing

24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style

22 Jul 2020Pension scams increase amid lockdown by Sophie Smith for Pensions Age & Missed Opportunity to Use Victims in Scam Work by Amy Austin for FT Adviser

21 Jul 2020  Londongrad Calling: Is Europe’s Laundromat the ‘New Normal’? by Mark Conrad

20 Jul 2020 Campaigners Aim to Create Pension Scam Database by Michael Klimes & Government eyes unauthorised firms by Justin Cash for MoneyMarketing

17 Jul 2020 – Year ‘dominated’ by FCA shortcomings as 205 complaints made,  by Rachel Mortimer for FT Adviser

29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360

14 May 2020 – Under Rising Pressure on Climate, JP Morgan Rejects Shareholders’ Calls to Disclose Carbon Footprint by Alex Varley-WInter for DeSmog

11 May 2020 – FCA urged to build public trust in independent reviews by Rachel Mortimer for FT Adviser

30 Apr 2020 – FCA was warned three years ago about mini-bond firm Blackmore Bond, which collapsed with £45m of savers’ money by Ben Chapman for the Independent

15 Apr 2020 – Met police lose two thirds of finance officers as fraud soars by Ben Ellery for the Times

25 Mar 2020 – Care Home Wants NatWest Docs in Misselling Fight by Law360

20 Mar 2020 – Connaught review delayed as Covid-19 concerns loom by Rachel Mortimer in FT Adviser

07 Jan 2020It’s time to keep your pensions promise, Boris! The PM pledged to help these victims of a huge scam FOUR years ago – and they’re still waiting by Tom Kelly for the Daily Mail.

29 Dec 2019‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, and ‘Making millions from other people’s misery’: A Government adviser, call centre chief and pension scheme director are among those who stand accused of involvement in pension schemes that exploited loophole in the law by Tom Kelly for the Daily Mail

15 Aug 2019Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail

05 Aug 2019Plunder in paradise: The ‘adviser’ behind a Costa scam that has cost expat pensioners £25MILLION – and led one to attempt suicide by Laura Shannon for Mail on Sunday

05 Jul 2019 Government-owned bank ‘forging signatures’ in repossession cases by Andy Verity for BBC

18 Jun 2019“I came home to find my house had been stolen!” by Angela Ellis-Jones for the Daily Mail

20 Jun 2019 – FCA orders review of its handling of Connaught collapse by Rachel Mortimer for FT Adviser

13 Jun 2019 – Investigation into disgraced RBS small business unit branded a ‘whitewash’ by MPs by Ben Chapman for the Independent

07 Jun 2019Guernsey Stock Exchange disputes FCA account over Woodford by David Thorpe in FT Adviser

29 Mar 2019MPs call for inquiry into alleged forgery of signatures by Andy Verity for BBC

15 Feb 2017 – RBS accused of fraud & forgery by customers and ex-employee by Andrew Hosken for The World Tonight BBC Radio 4

22 Dec 2016Solicitors suspended for roles in collapsed Brazilian investment scheme by Nick Hilborne for Legal Futures

23 Sep 2016Which? makes scams super-complaint by Adam French for Which?

08 Aug 2016The Latest Bank Interest Rate Scandal Signals A Crisis Of Australian Democracy by Professor Carl Rhodes for New Matilda

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