TTF Blog: 02 November 2020

Watchdog chief to take questions from MPs

Questions for Nikhil Rathi, FCA chief

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

We will be running a ‘no-holds-barred’ Symposium on Wednesday evening on what high profile critics see as the many failings and flaws within the UK’s financial services regulatory framework.

Meanwhile the new chief of the Financial Conduct Authority, Nikhil Rathi, is appearing in front of MPs for the first time since he began his tenure at the watchdog. On Wednesday afternoon he will be accompanied in front of the Treasury Committee by Charles Randell, who chairs the FCA.

You can see Transparency Task Force’s wish list for Nikhil Rathi in our October 12th letter, here, and can tune into Wednesday’s routine scrutiny by MPs, here.

Questions for FCA chiefs from victim of fund collapse
Mark Bishop, head of the Connaught Action Group, is an advisor to TTF and represents a group of investors who collectively lost more than £100M when Connaught Income Fund Series One collapsed.
 
An External Review of the FCA’s handling of the financial scandal recently finished its process of “Maxwellisation” where bodies criticised had a chance to respond. Their deadline to do so was October 20th, the Times‘ James Hurley reported, but the Connaught Review has not yet emerged.
 
Mark Bishop has written to the Treasury Committee with questions that he hopes FCA chiefs might face on Wednesday, including:
 
1. When will the FCA’s External Reviews be published into allegations of regulatory failure, on Interest Rate Hedging Products, Connaught fund, and London Capital & Finance? If they cannot give dates now, can they give a week’s notice of publication?
 
2. Does the FCA see these External Reviews solely as ‘lessons learned’ exercises, or does it accept that, if regulatory failure is evidenced … it is likely to face understandable demands to compensate the victims? How does it intend to deal with them?
 
3. Is the leadership team willing to work with the victims in these three scandals, on consensual and verifiable reform?
 
4. Does the FCA accept that the recent public consultation on its own complaints scheme set out to make it even harder for the public to access remedies for complaints against the regulators? Why has it named only seven consumer organisations it claims to have consulted on that scheme, and why were many other groups, including those representing victims of the three cases currently at External Review, not even approached?
 
5. Would the FCA work with the outgoing Complaints Commissioner, with victims and with other consumer and campaigning groups, to draft a revised Complaints Scheme they believe complies with the Financial Services Act 2012 and would meet users’ needs; and then consult on that?
 

 

Treasury Committee MPs taking evidence on Economic Crime

Mel Stride, chair of the Treasury Committee. Pic: David Woolfall

The UK’s Treasury Committee MPs are also currently accepting evidence for a pending inquiry on Economic Crime, in the wake of the global FinCEN files leaks, which have rocked the world of banking.

The deadline for submitting evidence is 5pm on Friday 27 November. The Treasury Committee will probe-

Anti-money-laundering / sanctions regime

e.g.

Effect of economic crime on consumers

e.g.

  • Emerging trends in consumer facing economic crime as a result of the COVID crisis
  • The operation of the Contingent Reimbursement Model for Authorised Push Payment Fraud
  • The response of financial institutions to economic crime as it affects consumers

Here are the previous Treasury Committee’s Reports on Economic Crime.

The Treasury Committee add that they ‘will not take up individual cases’ and that ‘any suspected criminal activity should be reported to the appropriate authorities’.

TTF’s Brexit fears on the ‘international dimension’ of scams

Transparency Task Force feels there is a high chance that the unsatisfactory levels of cooperation between regulatory and enforcement agencies that exist now will get even worse after Brexit.

There is uncertainty ahead about what the future holds, especially around the international dimension to financial services regulation.

Calls to sack the CEO of Malta’s financial regulator  – after he holidayed with one of the suspects in the murder of a journalist – caught our attention. While this week’s blog largely covers the UK we believe what we describe here has a strong international dimension.

Why do the UK's whistleblowers suffer?

In the US, the hundredth whistleblower recently came forward under the Dodd-Frank Act, a law that has “allowed the SEC to recover $2.5 billion in sanctions and returned $750 million to harmed investors” according to Stephen M. Kohn and Mary Jane Wilmoth, who specialise in that field of US law.

In the UK, the situation for whistleblowers is very different as Paul Carlier, one veteran of that scene, recently outlined to me. Not only do they have no financial reward for their disclosures, but  they appear to suffer active discrimination. A full 70% of City whistleblowers coming forward report suffering damage and victimisation for having done so, according to recent research by ‘Protect’ the whistleblowing charity.

Is whistleblowing advice being critically watered-down?

According to Carlier, when he blew the whistle, he followed his bank’s guidance to the letter, but was told at his Employment Tribunal that he did not qualify for whistleblower protection. He believes this is the same for many large firms today, and that employers are giving watered-down advice to whistleblowers – sometimes, unfortunately, coming from whistleblowing ‘experts’ themselves, but that does not put them under the umbrella of ‘protected disclosures’ under the strict terms of the Public Interest Disclosure Act (PIDA).

This is a relevant law that ought to apply but it is often cited by whistleblowers as needing improvement. Carlier argues that model advice to UK employers needs to be urgently improved — alongside the law itself — if employees flagging up critical risks, or seeking to prevent economic crimes, can genuinely feel protected coming forward. You can read more of his views on Paul’s blog.

Women's missing £millions: Ex-pensions minister speaks

Transparency Task Force interviewed Sir Steve Webb, former pensions minister, last week, about his petition to Parliament regarding women’s pension entitlement. You can see our video of the interview here. You can sign his petition here: “Review state pension entitlements for all women who may have been underpaid”.

‘Old-fashioned’ system

Webb told us that the unfairness he’s addressing “relates to a system that was designed after the second world war. It’s a very old fashioned system but it’s still with us today.

“It was a system that assumed that in many families, the male bread-winner would go out and earn the money, and his wife didn’t need a pension in her own right because she would depend on him in her old age.

“It seems quite strange now to talk in those terms, but this is still a feature of much of the present system.”

“What we discovered earlier this year, was that there were cases where it wasn’t actually working properly. So for example a married woman’s husband would reach pension age and her pension wouldn’t be increased, or sadly, her husband would die and her pension wouldn’t be adjusted for the contributions he’d made; or they would get divorced, and her pension wouldn’t be adjusted.

“It’s the system that existed up until 2016, so we have a new system now, but most people who are retired, retired under the old system.”

He added: “I increasingly think however that we’ve opened a can of worms, and that when they check married women, and widows, and the over-80s and so on, it wouldn’t astonish me if we end up with a bill of £100M. I think that’s the sort of amount of money that we could be talking about.”

“This was a problem when I was a Pensions Minister, I just wasn’t aware of it. But now that we know about it I think the onus is on the Government to fix it.”

Women’s pension poverty – a global problem

Josina Kamerling pointed out during the session that “this is a petition that is looking backward and seeks to redress issues, but in light of the pandemic pensions have taken an even bigger hit than foreseen, leading to bigger pension poverty for women.” She said: “This is really a problem that we are seeing everywhere around the globe.”

Sir Webb responded: “We spend so much of our time thinking about private pensions, and company pensions, and deficits, and markets and all the rest of it. But actually the state pension is the bit of the system that helps to correct the inequalities of the labour market. So much of the inequalities in pension provision for women is a mirror of the inequalities in the labour market, as of course you well understand.

“A good state pension foundation helps to correct some of those inequalities especially when, if you’ve been relying on the market to protect your pension in the current crisis, you’ve probably suffered. A state pension that works well, and redistributes – is crucial to tackling the inequality that you mentioned.”

Lord Sikka on ‘Dark Side of Capitalism’ in maiden speech to UK Parliament

‘Over the years, I have given evidence to many parliamentary committees in the UK and the European Union, and advised them as well. Most recently, I advised the House of Commons Work and Pensions Committee on its investigations into the collapse of BHS and Carillion.

My research has often focused on what I call the dark side of capitalism. For example, the UK has the highest number of qualified accountants per capita in the world, but this huge social investment has not really given us good corporate governance, reliable financial reports or even honest audits.

A banking crisis in every decade since the 70’s

The problems are systemic, going far beyond the affairs of just BHS and Carillion. This country has had a banking crisis in every decade since the 1970s. The finance industry has been a serial mis-seller of products and has admitted to rigging exchange rates and interest rates. These events draw attention to very deep-seated cultural and regulatory fault lines, which really need to be looked at.

The UK is also the home of a rampant tax avoidance industry, which enables companies to avoid taxes by shifting profits to low or no-tax jurisdictions through intragroup transactions. My response to that was to join up with some colleagues; in 2003, I became a co-founder of the Tax Justice Network, with the sole aim of sensitising people to how taxes are avoided and what the social consequences are.

I am a person from a working-class background, somewhat overawed at being here, and I wondered what on earth my objectives should be. I think there are really only two: to increase people’s prosperity and people’s happiness—there can be no other objective. However, in a country where 14 million people live below the poverty line, it seems that both happiness and prosperity are in short supply.’

You can see the full speech – of 27 October – on Hansard.

Press Timeline of relevant articles:

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

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 2020 MPs 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 that 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’, 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 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

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

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