TTF Blog: 25 January 2021

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

After Treasury Secretary John Glen appeared to stonewall justice for Equitable Life victims, and ‘parliamentary arithmetic’ stalled MPs attempts to get tough new measures on economic crime into law,  the Treasury Committee will hear from its first expert witnesses on Economic Crime today. Will this resolve the UK’s malaise?

Corporate Crime fudge

As researchers at NGO Spotlight on Corruption have pointed out, back in 2015, the Conservative Party manifesto stated that it would make it a crime for companies to fail to put in place measures to stop economic crime. Six years on, and the government’s Law Commission is projected to be reviewing this topic all year. Last autumn, secret documents leaked to journalists implied that there are severe consequences to dropping the ball: in one secret intelligence assessment, analysts from the US Financial Crimes Enforcement Network ‘described the U.K. as a “higher risk” country for money laundering, on a par with Cyprus’.

Scandals of inequity

Bob Blackman MP chairs the All Party Parliamentary Group on Pension Scams, which TTF set up and helps to run. He spearheaded a debate last week on the decades-long Equitable Life scandal, which I covered on this blog last week. In Blackman’s view, the Equitable Life case is ‘absolutely unique ‘: “Back in the 1980s, Equitable Life started what can only be described as a Ponzi scheme. I distance the current Equitable Life board from what was going on in the 1980s, but the company then deliberately set out to create a scheme whereby it promised bonuses that could not be achieved and could not be sustained in the long term.”

He went on to explain, introducing a full Parliamentary debate on the scandal, there had been “a conspiracy between Equitable Life, the regulator and the Government of the day. Equitable Life was considered too big to fail because if it did, the Government would have had to pick up the costs. The scandal went on, and the House of Lords was involved in setting aside the position way back in 1999, as a result of which Equitable Life closed to new business in 2000.”

Treasury called to task on transparency

The Treasury, meanwhile, was accused by MPs of failing to be transparent to Equitable Life victims, on the knotted issue of how compensation payments were calculated. The total loss from Equitable Life’s collapse was estimated at more than £4bn, victims’ campaigners report they have received on average only 22% of what they lost, and that some have died without receiving justice.

Alistair Carmichael MP also contributed to last week’s debate, pointing out that the problems experienced by Equitable Life victims indicate the wider issue of enforcement and restitution against financial crime.

Fraud victims forced to raise money for lawyers

Carmichael explained: “Over the last few years, I have been working with constituents and other people throughout north-east Scotland who have lost money as a result of the fraud of Alistair Greig, director of Midas Financial Solutions in Scotland. He was eventually jailed for 14 years by the High Court in Scotland for running a Ponzi scheme. The financial services compensation scheme has started paying out compensation to the victims of that fraud, but let us just say that it did not do so willingly. My constituents and many others have had to put together and invest more than £2 million in legal fees to get the FSCS to the point where it was prepared to pay out.”

Does history repeat itself? The Financial Services Compensation Scheme is currently facing a judicial review from victims of the London Capital and Finance scandal, in which – for many of the victims – mini-bonds were misleadingly marketed as ISA-qualifying investments. The scheme collapsed and they lost their savings.

Last week James McClelland QC told the court by remote hearing “It seems they [LCF] were willing to contract with anyone including people on social security benefits & with very limited means.” Some “had to sell their homes, one faces the threat of homelessness, one refers to cutting back on meals” – it is an horrific case.

TTF gives evidence on ‘Push Payment Fraud’ to Economic Crime probe

“The 62 individuals whose cases are on my desk have lost an average of over £60,000 each, totalling over £4M” explains fraud investigator Richard Emery, in written evidence to MPs’ Economic Crime inquiry for TTF.  More widely, during the six years 2014 – 2019 there were an estimated 300,000 cases of authorised push payment fraud (in which bank transfers are made to fraudsters, often by them using deceit or impersonation) with losses totalling c.£1.3bn, according to lobbyists at UK Finance.

Emery is highly critical of banks’ speed of action against push payment fraud, and how slowly some victims are served – stolen funds are often rapidly dissipated. “Where beneficiary banks freeze funds in an account that is being used for fraud there is a process by which these funds can be repatriated to the victim” he explains, “this process can be infuriatingly slow and in one recent case it was nearly six months before the victim’s bank was able to confirm that they had not been able to recover any of the stolen funds.”

APPG on Fairer Finance speaks up