UK risks ‘unforgivable failure of government’ against fraud
by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting
It is gallingly easy to lose your life savings online, if you trust the wrong paid-for advert at the top of your search results.
Police themselves have warned of a legal loophole or ‘gap in protection for the public’ on internet search engines, and Parliament’s Pension Scams inquiry – which Transparency Task Force campaigned for – has repeatedly urged the Government to crack down on fraudsters’ online adverts. While it promises to act, the government is dragging its feet.
Police warning hits brick wall
Stephen Timms MP, who chaired the inquiry, addressed Parliament this week that paid-for scam adverts are ‘the heart of the problem’ of large scale fraud, and that that is “not just the view of the Inquiry it’s the view of almost everybody outside Whitehall, except for the internet companies…”
That view includes the City of London Police, who asserted to Timms in May that excluding adverts and cloned websites from the Online Safety Bill is leaving “a gap in the protection provided for the public.” The inquiry also heard from insurance giant Aviva, who found 27 scam websites impersonating them. They explained how difficult it was to get those frauds taken down by tech giants.
Boris Johnson himself pledged that the ‘Online Safety Bill’ will tackle fraud. He is yet to follow through. The draft law still excludes paid-for advertising, which Timms warns is an ‘unforgivable failure of government’: “The Prime Minister has said that tackling online fraud is one of the [Online Safety] bill’s main aims.
“And yet the current version of the Bill leaves out the major part of the problem”.
£200,000 stolen under Google’s nose
Timms cited compelling testimony to the inquiry from one-man campaigning accountant Mark Taber, who uses Twitter and press interviews to raise awareness of online fraudsters.
Taber has implored MPs scrutinising the draft Online Safety Bill to legislate on big tech, he writes: “Voluntary measures would not be enforceable against online platforms. There is a long history of platforms such as Google and Facebook bringing in new policies designed to curb consumer harm but then failing to implement or apply them effectively.”
For example, Taber reported and tweeted about a fake ‘bonds’ investment site in May of 2020. He asked Google to take it down. One of the fraudsters’ victims later contacted him. An elderly bereaved lady, she’d just lost more than £200,000 to that website, This is agonisingly possible. Google had failed to take the fraudulent Ad down since Taber had reported it, and there had, after all, been no legal requirement on the tech giant to take action.
Dawn French, Richard Branson and Robbie Williams are among celebrities whose images were mis-appropriated in fraudulent online ads, in a bid to gain victims’ trust. They signed an open letter calling for action. The government’s current plan to reform online advertising will, they argue, take far too long and be met by convoluted industry lobbying.
Timms agrees: “It will be years before anything changes, and thousands more people will have lost their life savings in the meantime”.
Hodge: fraud is impacting UK's national security
Timms’ plea was voiced as part of a wider debate in Parliament about the need for real action on economic crime. Money-laundering, fraud, and tax evasion affects one in 15 people in the UK and ‘impacts on our national security’ to the tune of hundreds of £billions, according to Margaret Hodge, MP for Barking, who as a former chair of the Public Accounts Committee is a veteran campaigner for financial integrity.
Dirty money is “used to control our football clubs, our vital infrastructure, and more recently our politicians and our politics,” she warned. Meanwhile, the UK’s lack of corporate transparency is ‘making it difficult to follow the money … if you can’t follow the money, dirty money triumphs.”
Hodge added that, while coronavirus dominates the news, Boris Johnson is at risk of breaking his party’s promise to voters on economic crime. Conservatives pledged in 2015 to create a criminal offence that will force companies to adopt procedures to prevent economic crime, or risk breaking the law.
This criminalising of “Failure to Prevent” is a knotted subject to legislate on; not least because con-artists tend to be adept at evading systems that are supposed to catch them. But a knot is never untied by ignoring it. Instead of drafting an Economic Crime bill upon election, the government launched a consultation for four years “and then they parked the issue in the long grass by referring it to the Law Commission,” Hodge said. The Law Commission is appointed to advise the government on legal reforms, and is expected to release its recommendations in the new year.
The mooted crack-down on kleptocracy is ‘gathering dust’
There is a third key area, too, on which Johnson’s government is failing. As Hodge told Parliament this week: “Buying a property through a shell company registered in the British Virgin Islands is the easiest way to launder your money into the UK” although this is often explained by “not just money laundering but avoiding stamp duty, inheritance tax and other taxes.”
The government mooted a ‘register of beneficial ownership’ of property -which would reveal who really owns it – some years ago, but as Hodge notes: “We still have not got a bill. Although it’s my understanding that that bill is written and just gathering dust on the shelf.”
Biden urged to impose stricter requirements on IFAs
“In the United States, there are nearly 13,000 investment advisers with little to no anti-money-laundering due diligence responsibilities” warned NGO the Global Financial Integrity initiative this week.
Pledges to close this U.S. loophole were first mooted almost 20 years ago, in 2002 — a pace that makes Boris Johnson’s mooted reforms look almost sprightly.
Global anti-crime think-tanks are now recommending that the US Treasury “develops an AML [anti-moneylaundering] rule covering both investment advisers and investment companies to address significant threats to America’s financial system, national security, and citizens’.
Hollinrake: fraudsters enjoy the ‘concentration of advisers in this country’
Kevin Hollinrake MP chair of an all-party group on Fairer Business Banking, also laid into rogue advisers this week. He said the UK is targeted by fraudsters “because of some of our lax regulations … but also because of the concentration of advisers in this country, be they lawyers, accountants, consultants— these other people who facilitate the rabbit holes that this money goes down so that it can then be used for legitimate purposes. That is what happens with this money, but the starting point is these terrible crimes.”
Meanwhile, investigative journalists continue to track the fall-out from the British Steel debacle, in which many lost their life savings. What journalists are seeing is that there seems to be a lack of any individual consequences for potentially catastrophic advice in the UK, leaving the wider advice industry – via the Financial Services Compensation Scheme – to pick up the tab.
MPs and lawyers warn against fake fixes on fraud
“We need and want corporate liability reform and we want it now,” Hodge addressed Parliament this week. However, if there isn’t “direct liability” on fraudsters themselves, then the risk of fraud “simply becomes a business cost and it will not change the behaviour and conduct of these big corporations,” she believes.
Corporate lawyers also warn that UK employers are unlikely to be able to deter fraudulent employees – by a new ‘failure to prevent’ offence for example – unless the fraudsters themselves risk arrest.
Jessica Chappatte of Herbert Smith Freehills spoke at the firm’s Corporate Crime conference on Tuesday: “In our view individuals do not refrain from misconduct because of the risk of prosecution to their companies.” Her colleague Robert Hunt, who recently completed a secondment with the Serious Fraud Office, agreed: “It seems to me that without doubt ethical behaviours are driven by real risk of going to prison,” he said.
The thin blue line? Corporate secondments with police
The Crown Prosecution Service, National Crime Agency and Police forces are increasingly celebrating the use of corporate collaboration to fight economic crime. As perhaps they should in an under-resourced police service, you need all the help you can get.
However, TTF Blog understands that the Met Police is also touting secondments to corporations, where employees can go and work in the police for a set period of time. Called the ‘private sector secondee scheme’, this is part of the Met’s ‘private sector toolkit’. That raises a few more questions. The interim conclusions of the Bank Signature Forgery Campaign, aired at a TTF Symposium last month, are incredibly alarming. Hundreds of crime reports against banks have for so long been stonewalled by the National Crime Agency, that many campaigners believe that the police and private sector are too close already.
Attempts to investigate claims against established private sector companies are rare. Thames Valley Police’s prosecution of the HBOS fraud – in the mid-2010s – has since become legendary among anti-fraud campaigners, and with good reason. However, prior to that prosecution senior managers had vociferously denied that there was any such fraud taking place within their bank. In fact they had denied it for about ten years, stonewalling victims and even smearing their Head of Risk Sally Masterton, before culprits were ultimately prosecuted.
What would happen today? Would employees at HBOS have been prosecuted? Would they be offered a ‘deferred prosecution agreement‘? Would they have employees on police secondment? Or all three in tandem? Investigations benefit from access to information and there is no doubt that information-sharing combats serious organised crime. Sometimes this is information that only large corporations can provide. But where’s the thin blue line on secondments? Is that a step too far?
There is more about JMLIT, or the Joint Moneylaundering Intelligence Taskforce, on the NCA website.
Press Timeline of relevant articles:
02 December 2021 – 18th British Steel IFA declared in default as advisers carry on next door by Laura Purkess for Citywire
26 October 2021 – ‘Regulator must not be tainted by scandal‘ by James Hurley for the Times
12 October 2021 – Civil war: FCA staff pushing for union involvement after pay cut row with CEO Nikhil Rathi by Michiel Willems for City A.M.
10 October 2021 – Outrage over £125m bonuses for staff at UK’s ‘failing’ financial watchdog by Jon Ungoed-Thomas for the Guardian
10 October 2021 – Post-Brexit push: FCA to market London’s financial services sector abroad by Lily Russell-Jones for City A.M.
09 October 2021 – Financial watchdogs told to boost City abroad by Louisa Clarence-Smith for the Times
06 October 2021 – Too big to jail: why the crackdowns on dodgy finance have been so ineffective by Prem Sikka for the Guardian
01 October 2021 – HDFC bank denies allegations of not flagging forgery to authorities by Dinesh Unnikrishnan for Money Control
21 August 2021 – ‘She groomed me for £10,000’: scandal at FSCS as employee goes rogue – Staffer charged with helping London Capital & Finance victim recover £20,000 but soliciting loans as well by Harry Brennan for the Telegraph
12 August 2021 – Whistleblowers make 2,754 separate allegations of financial misconduct to FCA by Pedro Gonçalves for Investment Week
26 July 2021 – Foxes in the hen house? The trouble with politicians in financial boardrooms by JB Beckett for Investment Week
20 July 2021 – Divorced From Reality: How Legal Loans Racked Up Half a Million Debt for a Standard Divorce by Katie Tarrant & Alex Varley-Winter for BylineTimes
15 July 2021 – Don’t ditch ‘tried and tested’ investments for ESG by
13 July 2021 – Private equity and the raid on corporate Britain by Kaye Wiggins, Harriet Agnew and Daniel Thomas
05 July 2021 – FCA breaking law over consumer consultation, campaigners allege by for MoneyMarketing
02 July 2021 – Banks’ bad behaviour damaging consumer confidence by
25 June 2021 – MPs LCF report too soft on FCA, campaigners say by
06 Feb 2021 – Fraud victims suffer enough – guarantee will help innocent overcome shame of scamming by Daniel Jones for the Sun
05 Feb 2021 – Leader: The FCA’s leaders need to step up when things go wrong by Justin Cash for MoneyMarketing
04 Feb 2021 – Pension scam victims say regulators should have saved them from from losing life savings, by Jessica Beard for the Telegraph
02 Feb 2021 – SMCR rules come back to bite FCA in mini-bond probe ‘rules around senior managers being held responsible for their actions have come back to bite the regulator’, by Daniela Esnerova for MoneyMarketing
02 Feb 2021 – Regulation must deliver transparency and protection for Buy Now Pay Later consumers by Alex Marsh for City A.M.
02 Feb 2021 – Bank chief Bailey ‘should be censured’ for failings by James Hurley for the Times
02 Feb 2021 – FCA criticised for trying to omit names from LCF report by Rachel Mortimer for FT Adviser
02 Feb 2021 – Poll: Should FCA executives bear personal responsibility for the London Capital and Finance fallout? by MoneyMarketing
01 Feb 2021 – Investment funds flouting new transparency rules by Patrick Hosking for the Times
01 Feb 2021 – MPs launch full inquiry into London Capital & Finance scandal with chairman declaring it will be “thorough and clear” by Jim Armitage for the Evening Standard
29 Jan 2021 – The Financial Services Bill doesn’t provide the tough regulation we need by Professor Prem Sikka for Left Foot Forward
25 Jan 2021 – FCA urges clients of collapsed British Steel firm to consider claims by Sonia Rach for MoneyMarketing
21 Jan 2021 – MPs call on FCA to ‘hold bad advisers to account’ by Laura Purkess for CityWire
21 Jan 2021 – FCA told it lacks vision to tackle consumer issues by Amy Austin for FT Adviser
18 Jan 2021 – Former Hong Kong lawmaker rejects HSBC’s explanation over frozen accounts by Reuters
18 Jan 2021 – What we learned from a bumper FCA data dump by Justin Cash for MoneyMarketing
18 Jan 2021 – Wall Street fears bubble from Biden stimulus as retail investing booms by Katherine Greifeld, Claire Ballentine and Vildana Hajric for Independent.ie
15 Jan 2021 – Mortgage prisoners accuse Treasury of working against them as wider FCA remit blocked by Owain Thomas for Mortgage Solutions
14 Jan 2021 – MP Vows To Keep Pushing Tougher Economic Crime Law by Richard Crump for Law360
12 Jan 2021 – Bitcoin: be prepared to lose all your money, FCA warns consumers by Kalyeena Makortoff for the Guardian
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 2021 – Bank of England fails to publish officials’ expenses by Alex Ralph for the Times
18 Dec 2020 – Executives 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 2020 – The fallout from the financial regulator’s shocking failure on LC&F is not over yet by Nils Pratley for the Guardian
17 Dec 2020 – FCA 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 2020 – Former Financial Conduct Authority boss Bailey apologises over handling of mini-bond scandal by Ben Martin for the Times
16 Dec 2020 – EU cannot be ‘captured’ by City of London, warns financial services chief by Sam Fleming and Jim Brunsden for the Financial Times
09 Nov 2020 – Spike 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 2020 – How financial services watchdog has reacted to UK consumer worries in Covid by Hilary Osborne for Guardian
08 Nov 2020 – Five predictions for banking regulation in a Biden presidency by Jon Hill for Law 360
05 Nov 2020 – Martin Lewis warns of ‘epidemic of scams’ after ICU nurse loses £8,000 by Scott Edwards for Wales Online
05 Nov 2020 –FCA 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 2020 – Aviva’s shares fiasco highlights weakness of the city watchdog by Patrick Hosking for the Times
02 Nov 2020 – Banks 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 2020 – U.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
23 Oct 2020 – Bank 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 – Work 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
11 Sep 2020 – The Hut Group facing fresh questions over governance after it reveals one of country’s best-known private equity barons to oversee pay policy by Lucy White for the Daily Mail
10 Sep 2020 London Capital and Finance investors relieved after court ruling opens route to compensation claims by Ben Chapman for the Independent
05 Sep 2020 Crime Agency under fire over bank signature forgery by Andy Verity for BBC
24 Aug 2020 – Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times
04 Aug 2020 – Have 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
28 Jul 2020 – MPs launch inquiry into pension scams by Tom Kelly for Daily Mail ; UK 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
21 Jul 2020 Londongrad Calling: Is Europe’s Laundromat the ‘New Normal’? by Mark Conrad
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
11 Jun 2020 – Blackmore minibond investors get just £5m back by Ben Martin for the Times
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 2020 – It’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
03 Sep 2019 –
Chris Gordon Developer who ‘lost £1m’ takes legal action against Ulster Bank by Alan Erwin for the Belfast Telegraph
30 Aug 2019 – MPs back businessman on hunger strike at Clydesdale Bank by Kalyeena Makortoff for the Guardian
15 Aug 2019 – Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail
05 Aug 2019 – Plunder 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 2019 – Guernsey Stock Exchange disputes FCA account over Woodford by David Thorpe in FT Adviser
29 Mar 2019 – MPs 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 2016 – Solicitors suspended for roles in collapsed Brazilian investment scheme by Nick Hilborne for Legal Futures
10 Oct 2016 – The Dash For Cash: Leaked Files Reveal RBS Systematically Crushed British Businesses For Profit by Heidi Blake, Jane Bradley, Tom Warren & Richard Holmes for Buzzfeed News