TTF Blog: 21 September 2020

Pension scams inquiry told regulators asleep at wheel

Palace of Westminster

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

Parliamentarians are increasingly keen to make changes to the law to protect £trillions of pension pot savings from being stolen or squandered, with a Pensions Bill progressing through Parliament and at least 31  MPs expressing an interest in the All-Party Group on pension scams, which we helped set up at the beginning of the summer.

How the law could be improved is open to debate, but two ‘Wild West’ arenas are drawing interest: 

  1. Online spaces, which appear to be a free-for-all for fraudsters to advertise in.
  2. International activity  – with scammers who operate across jurisdictions, but face consequences in none of them.

MPs on the pension scams inquiry, which Transparency Task Force and others called for, have taken evidence where these aspects of the problem and others were discussed.

Transparency Task Force on a national scandal

Exactly as I’m writing this, on Sun 20th, leaks are emerging from the International Consortium of Investigative Journalists about  nonexistent regulation of ‘Suspicious Activity Reports’ from banks. A world-wide scoop, subjecting mega-banks and United States financial regulators to scrutiny.

But as this is TTF’s blog, let’s start with our Pension Scams campaign in Westminster: Jack Gray of Pensions Age covered our evidence to Parliament : ‘Regulators were warned “many years previously” of organisations that scammed savers.’

TTF’S founder Andy Agathangelou told the Inquiry it is a ‘national scandal’ and: To make it worse, there are many instances we believe – and we believe we can support this with hard evidence – where the scams are scams that were reported to the regulators many years previously, sometimes by individuals, sometimes even by other regulators in another part of the world, saying: ‘There’s something not quite right about that organisation, we suggest you investigate with the view of closing them down’. “If that kind of hard evidence is ignored, then what hope have we got?”

Watchdogs under pressure

Ahead of the Financial Conduct Authority’s annual meeting this Thursday, the  Independent‘s Ben Chapman revealed that the Royal Bank of Scotland ‘routinely took out millions of credit in its customers’ names without telling them, to cover losses on products the bank had recommended –  yet regulators failed to take action’; one source, Steve Middleton, was quoted in Chapman’s article, he claimed last week on Twitter that he had been trying to expose the scandal for six years to journalists who had  ignored him. Very well done, then, to the one that listened.

British media  grandee John Humphrys then wrote a think-piece in the Mail – the UK’s most-read conservative newspaper: ‘Are today’s Bank Robbers the ones in suits?’ – he ended with a quote from Nobel prize-winner Joseph Stiglitz: “Rather than justice for all, we are evolving into a system of justice for those who can afford it. We have banks that are not only too big to fail, but too big to be held accountable.”

City regulator says rules need to change

Not before time, the FT reported last week that UK watchdog the Financial Conduct Authority has admitted that the rules on selling investments need to change after “too many scams and scandals”. The FT also reported that  plans to ‘cap redress at £10,000’ for complaints against financial regulators ‘are currently being opposed by the campaigning groups Transparency Task Force and the Connaught Action Group’. Nice to see that mentioned.

FinCEN Files Leak

The new trove of financial leaks by the International Consortium of Investigative Journalists and Buzzfeed News is, huge news that blows all the above out of the water.

City AM‘s Emily Nicholle summed it up neatly in less than 500 words, the leaked files consist of more than more than 2,100 Suspicious Activity Reports which are usually kept completely secret, but “are filed by banks to regulators to alert them of potentially criminal activity happening in their clients’ accounts”.

Significantly: “Once filed, these notices absolve banks of responsibility to ensure the laundering does not continue”… the regulator in this case is the US Treasury’s Financial Crimes Enforcement Network, which — many of the reports would imply — hasn’t taken investigative action on a lot of Suspicious Activity Reports for months, or even years. As that lid’s been lifted, they’ll now face actual questions about that for… who knows how long. One has to hope that they are having a productive Monday.

Transparency Task Force gives evidence to MPs

Stephen Timms MP chairing the Pension Scams inquiry
TTF's founder Andy Agathangelou giving evidence
The need for a protective wall

TTF’s founder Andy Agathangelou told MPs’ Inquiry last Wednesday: “We see a general lack of international collaboration … we are quite concerned that there is a very problematic grey area … when somebody carries out a transfer where part of the process involves an unregulated entity operating outside the UK.

“The regulators, we believe, have incorrectly deemed such cases to be outside their jurisdiction. We believe they are inside the jurisdiction if it is a UK-registered regulated entity that transacts the transfer.

“We think there is a huge breach going on that needs to be looked at and we think that many people have been told by the regulators that the regulators cannot help because it is outside their jurisdiction. We believe the regulators—at least in some cases, possibly many cases—are wrong.”

Pension scamming a ‘team sport’

Regulated entities often collaborate with unregulated ones to effect scams, as a form of organised crime. Andy told MPs: “the normal pattern is for there to be a regulated entity involved plus one or more unregulated entities involved. They operate together as a team. That is why trying to distinguish between what is sharp practice and what is criminality is difficult. It is like debating whether it was murder or manslaughter. We still end up with a corpse.”

“I would say that we do need to step back and take a macro view of what needs to be happening to protect the British public, compared to what is taking place right now.”

Why aren’t rogues’ online shop-fronts for scams shut down?

Andy said: “The internet is riddled with bear traps for people with money, lots of tripwires and it is easy to get caught. Unfortunately, despite the fact that many volunteers have been successfully alerting the regulators to hard evidence of rogue adverts that are the fronts for criminal activity, we are not convinced that all of that alerting that is being done is being effectively picked up by the regulators.”

Can internet giants step up?

Richard Piggin, of Which? confirmed that these unregulated onine spaces — on search engines and on social media — are a live problem: “Back in 2016 we found a significant number of paid- for adverts on search engines, online platforms and social media sites specifically aimed at attracting people looking to withdraw funds from their pension as a result of the pension freedom reform. We are still seeing those types of adverts and engagement on social media sites and online platforms and we need to look at what sort of responsibilities should be given to those online platforms to protect their users from scams?”

Are repeat-scammers raiding £trillions?

MPs also heard about what appear to be significant problems with law enforcement agencies and regulators simply not engaging with claims about repeat-scammers. Margaret Snowdon, chair of the Pension Scams Industry Group, raised the issue: “We see a lot of people who perpetrate scams of one form or another. What we find is the same names, the same address, the same telephone numbers, the same companies come up time and time again.”

She explained the industry’s fears: “With something like £2.5 trillion worth of pensions money still sitting in pension schemes, there is a huge prize for scammers to go for, … I think sharing intelligence is very useful. Within PSIG we run a forum with about 44 different organisations who get together once a month to talk about the individuals they have seen practising and share that … But that is only within 44 companies and we get very little, if any, intelligence back from law enforcement or from regulators. That does not help us.”

If you’d like to watch the Parliamentary evidence session in full, it’s here with a transcript here.

How to stop scams? Emerging suggestions:

One immediate focus in the UK will be lawmakers trying to put some consumer safeguards into the Pensions Bill, and sharing ideas for industry-wide solutions.

I’m collating a few ideas I’ve noticed at TTF events and in Parliament, here.

A National Fraud Strategy

Tim Fassam, a director at the Personal Investment Management and Financial Advice Association, told the Pension Scams Inquiry last week that: “To date the Economic Crime Plan was predominantly focused on money laundering. The Treasury is consulting about whether it should be extended to cover fraud and we would strongly support the development of a fraud plan, a co-ordinated strategy.”

I learned recently that the City of London Police has  a national fraud policing strategy, and they disclosed it to TTF Blog a couple of weeks ago; it’s here. It’s allegedly under-funded, but I was struck by these specific goals within it: to establish a victim oversight board, to update fraud complainants on the outcome of their report within 28 days, to embed ‘disruptive powers, including cease and desist, asset denial and serious crime prevention orders’ within ‘strategic and tactical plans’, and, implementing a new Fraud Investigation Model for serious and complex fraud investigations by December of this year. Worth a look.

Via the All-Party Parliamentary Group, MPs have also heard ideas on:

Can the industry fund legal support for victims?

At our first All-Party Parliamentary Group meeting on Pension Scams on September 7th, Andy Agathangelou asked whether pension companies could create a fund for legal advice to victims. He said: “For one individual scam victim to try and get justice is a nightmare, but if it could be properly organised pan-industry, maybe something really worthwhile could be done, in everybody’s interests.”

Prevention: better than cure?

Industry and other stakeholders at the All Party Parliamentary Group have shared ideas on whether scams could be prevented via a system of accreditation similar to the one for master trusts; and whether the pensions industry may be willing to fund a body that oversees and supervises products.

Pete Glancy of Scottish Widows addressed the All-Party Parliamentary Group: “From my point of view, I think there is too much emphasis on ‘buyer beware’. We have a population where 50% of the country struggle with percentages, but we’re asking people … to recognise these really sophisticated scams. That’s probably tackling it from the wrong end of the equation.”

“At the moment we [are] putting money into Financial Services Compensation, to cross-subsidise those shysters effectively. That money would be better spent paying for a body that oversees and ensures that any products that are permitted to accept people’s pensions money are top-notch. There’s another way to tackle it than to rely on the public to up their game.”

The FCA’s ‘vulnerable consumers agenda’

Chris Brooks of Age UK commented that scam-prevention ought to be thought about in conjunction with the Financial Conduct Authority’s vulnerable consumers agenda: “People tend to think about pre-existing vulnerabilities, but actually anybody can be vulnerable in that particular moment.” When I looked the agenda up, I found that the FCA is currently consulting on it and published research here. That consultation closes on September 30th.

Press Timeline of relevant articles:

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
16 Sep 2020 – Regulators Accused of Ignoring Scam Warnings by Jack Gray for Pensions Age
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

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

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

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

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

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

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

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