TTF Blog: 07 December 2020

Systemic failure to fight fraud across watchdogs, MPs told

Susan Flood, victim of the Ark scheme

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

Blistering victim testimony on the impact of investment fraud and regulatory failure in the UK, was last week given to MPs on Parliament’s Pension Scams Inquiry, a probe TTF campaigned for. You can watch the session here.

Ark Scheme victim Susan Flood, who together with her partner was scammed of approximately £250,000, told MPs that ‘systemic failures’ in the UK are “top-down from the majority of the regulatory bodies.” She said this applies to “HMRC, Companies House, FCA, PRA, TPR and SFO – that includes Action Fraud. … What happened to my partner and I pretty much ruined our family life and resulted in financial harm to us all. We’re still fighting for the return of our savings ten years on.”

MPs heard that despite being advised by regulated experts, and employing lawyers in response to red flags just weeks after the transfer, Flood and her partner were completely stripped of their pension savings and have yet to find any redress: instead, they have a monstrous tax bill on the ‘proceeds of crime’.

Flood told MPs: “We were lied to throughout the process. … We found ourselves in an Ark scheme, which meant that our life savings were actually put into a fraudulent land valuation and other unregulated investments. We [had] believed we were getting a low risk pension scheme.”

HMRC under pressure

Flood and her partner are facing 55% unauthorised charges from HMRC on the approximate £250,000 scammed from them – with the interest going up on that amount over the years.

Being hounded for tax on their losses is a common, harrowing experience for scam victims. The second witness at last week’s session was Dennis Waite, who lost, in a different HMRC-registered scheme, a £108,000 Royal Mail pension he had spent 21 years accruing. He told MPs that he is also facing a tax bill – of 40%-  on the proceeds of that crime.

Waite described how when he went to the office of the company that scammed him, he found dozens of other companies registered in the same building. The scam that Waite fell victim to is being investigated by the Serious Fraud Office. However, Rick Muir of the Police Foundation told MPs that punitive tax bills of the type faced by Flood and Waite can deter a lot of victims of financial crime from coming forward.

What is the true cost of inaction?

Flood told MPs that in her opinion, HMRC failed to engage with the issues cast up by the Ark scheme, since deemed by the High Court to be a type of ‘fraud on the power of investment’. She said: “I’ve asked to meet with HMRC numerous times over the years … swift action at the outset from HMRC in my opinion could have helped prevent the disasters of the past ten years.”

An adviser who ‘put £millions at risk’

The Pensions Regulator (TPR) described one of the key promoters of the Ark Scheme, Stephen Ward, in 2018 as “reckless and lacking in integrity” and banned him from acting as a pension trustee. It is important to note, at the same time, that TPR ‘did not find a lack of honesty or integrity’ (my emphasis) from Ward on the Ark Schemes, which he had introduced to 176 victims.

Instead, the TPR found that Ward had failed to learn from the Ark scam. Three years later he had promoted another massive scam.

The TPR’s 2018 report on Stephen Ward  where it covers the Ark Schemes, comprehensively sets this out: “The Position Statement prepared on behalf of Mr Ward for the hearing of this case stressed that at the time of making the introductions the schemes in question were registered with HMRC and the Regulator, and that Mr Ward was not a trustee or administrator of those schemes.

“The Panel was told in oral submissions on behalf of Mr Ward that no such trustee or administrator has been prohibited from acting as a trustee on the basis of dealings with the Ark Schemes.”

“[T]he Panel did not consider there was sufficient evidence of Mr Ward having actual knowledge of, or turning a blind eye to, the illegal nature of the activity of the Ark Schemes when carrying out his role as introducer before December 2011. We therefore did not find a lack of honesty or integrity on this issue.”

However: “The Panel took the view that a person of competence would … have learned from his experience with the Ark schemes. Mr Ward ought to have gained knowledge and experience from a close involvement with a pension scheme that was found to be a vehicle for pension liberation and had such grave consequences for members.”

The watchdog then shifted its focus to the later scheme that Ward promoted, in 2014, called London Quantum. In this scheme victims were ‘approached by introducers being paid commission to try to persuade pension holders to transfer their funds’. International Adviser reported on the London Quantum case  that more than 90 people had transferred their pensions “worth in excess of £6m ($7.7m, €6.75m)”.

Four years later Ward and another adviser were regulated for incompetence. Nicola Parish, TPR’s executive director of frontline regulation, concluded of the London Quantum scheme: “Stephen Ward and Anthony Salih put millions of pounds of other people’s money at risk and have neither the knowledge nor the skills needed to run a pension scheme.”

Parish added in her statement at the time, that: “Trustees play a vital role as the first line of defence for pension schemes, but these two men allowed huge sums to be invested into high-risk, exotic investments that bear all the hallmarks of being scams.”

Mounting financial scandals

At Transparency Task Force, it is impossible not to be aware of how victims of financial scandal have been piling up in the UK, with allegations that followed the last financial crash barely yet being looked at by the Business Banking Resolution Service before a wave of new complaints have come in linked to coronavirus.

Further, with Covid 19 having destabilised the economy, people are likely to be less financially secure and more vulnerable to fraudsters.

Meanwhile, the consequences of legacy cases might be coming home to roost. City watchdog the FCA is preparing reports on three prior scandals – the Connaught Income Fund Series 1, Interest Rates Hedging Products that were missold to SMEs, and thirdly, London Capital & Finance.

And the Pension Scams inquiry is now putting a lot of pressure on tax enforcers to reform their approach to victims of pensions and investment fraud. That pressure includes other voices in law enforcement. Rick Muir, Director of the Police Foundation, told MPs at last week’s session that landing large tax bills on victims is a form of ‘revictimisation’ – that for the victims this experience is akin to being scammed all over again. Concern was also expressed by MPs at last week’s session that HMRC is not on Project Bloom – an inititiative against scams that includes regulators and other law enforcers.

Project Bloom in focus

This is not the first time that TTF has heard that Project Bloom, a regulatory inititative to tackle scams in tandem, is insufficient. In October, TTF proposed that MPs could spearhead a ‘Joint Task Force’ against scams. What our members envisaged would be a “permanently staffed, co-located, working group, comprising representatives from each [regulatory] agency, with clear reporting and communication lines and accountability.” Seconded regulatory staff would then work together to ‘triage’ reports of scams. TTF members felt that this idea could mitigate the risk of competition, conflict or a lack of communication that might otherwise slow enforcement down. You can read that White Paper dated 14 October, on the Work and Pensions Committee’s website, here.

Alleged conflicts of interest for IFAs

There was one other idea that jumped out at last week’s evidence session: that an independent governmental body might be able to advise the public and steer them away from risky investments.

Asked about this idea, Susan Flood concurred that this might have helped her to dodge a bullet, and so could prevent future victims from being conned. However, she pointed out that she had taken supposedly ‘independent’ advice before she was scammed- and look where that got her. 

Flood suggested that financial advice must not be ‘based on commission’. This speaks to a controversial aspect of the UK’s financial ecosystem that I covered last week: Independent Financial Advisers are permitted to take undeclared or ‘secret’ commissions of ‘between 20% to 50%’ for promoting schemes to savers.

That quote comes from TTF member Peter O’Donnell, who lost his home to a scam in the 00’s. Now aged in his seventies, he directs a law firm seeking redress for similar cases to his own. O’Donnell believes MPs should enquire into the paying of high rates of commission to financial advisers. He has seen high rates of commission crop up repeatedly in cases on his desk.

Press Timeline of relevant articles:

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

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?