TTF Blog: 29 September 2020

PM Boris Johnson engaging with TTF & scam victims

TTF's meeting with PM Johnson

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

Transparency Task Force has just written to Boris Johnson, following a promising meeting last Friday between the Prime Minister, TTF’s founder Andy Agathangelou, pension scam victim David Burgess and his wife Lana. Mr Burgess is a constituent of Mr Johnson’s in Uxbridge, several years ago he lost £38,000 of savings  in an HMRC-registered Ark pension scheme, since deemed by a High Court judge to be a ‘fraud on the trustee’s powers’.

One of the reasons Mr Burgess had trusted the Ark scheme was – as the Mail‘s Tom Kelly reported in January – ‘because it was registered with HMRC and the Pensions Regulator’. After Mr Burgess’s previous meeting with Mr Johnson, as his MP, in October 2015 , Mr Johnson promised to contact Linn Homer, then-head of HMRC, about the Ark scheme. However,  David and his wife Lana heard nothing back at the time and were left in suspense. Hopefully this new engagement indicates some willingness to grasp the nettle.

A national scandal

Mr Burgess is far from alone in seeing his pension pot dissipated via an HMRC-registered and industry-regulated scheme.

TTF’s letter to the PM  recaps on the activity by Parliamentarians across the house on an issue that has been building in urgency over the last decade, exacerbated by Pension Freedoms. Many victims end up in a hideous double-bind: conned into transferring pensions into schemes that operated with a veneer of credibility, and then, as if that wasn’t enough, hounded, repeatedly, for tax from the money that was robbed – or squandered – depending on the case.

As Andy explains in a heartfelt letter to the PM, this crime takes an extremely heavy toll:

‘Despite having had hundreds of conversations with pension scam victims, I am struggling now to convey the emotional and financial shock that endures, without reprieve, when a member of the public is defrauded of their pension savings; especially in the case of older victims who don’t have the chance to replenish the savings that have been stolen.

‘When speaking to victims, they are normally depressed, and sometimes even feeling suicidal. I often mention my favourite Winston Churchill quote: “If you’re going through hell, keep going” in the hope that it might stimulate some self-belief and resilience. I’d like to think it sometimes does.

‘But sadly, there is no getting away from the stark truth that becoming a pension scam victim can lead to life-changing consequences that can be as shocking as a road accident; and also, that just like most road accidents, most pension scams are avoidable.’

Call to end taxman’s blindness to economic crime

Unfortunately, what is happening with HMRC is only one aspect of a problem that has dogged the pensions industry for more than a decade now, fed into by the UK’s — shockingly — relaxed stance on economic crime.

Pension scammers have repeatedly played the system to make off with people’s life savings and – despite reassuring words – regulators have often failed to react to reports of pension scams and have shut the door – if they ever have – long after the horse has bolted.

Wider issues of poor financial services regulation and vulnerability to scams, are likely to come to a head in the aftermath of Covid-19 business support loans, with predictions that consumer complaints services will become overwhelmed as financial support is withdrawn to all but the most needy.

Signs of change?

At least 31 MPs have taken an interest in our newly formed All-Party Group on Pension Scams  chaired by Bob Blackman MP, which is pooling ideas including suggestions for how to address this within the pensions industry itself.

Meanwhile, Stephen Timms MP,  as Chair of the Work and Pensions Select Committee, opened the pension scams inquiry, to which Transparency Task Force and others recently gave damning evidence.

In terms of further action, our letter explicitly calls for a tax amnesty for pension scam victims, if they are able to show that they are a victim of crime. This idea is being considered as part of the Pensions Bill that is working its way through Parliament. It is a reform that feels desperately needed, and very long overdue. Andy Agathangelou has said it before, but writes to the PM this week that we want HMRC to be ‘free’ ‘to treat pension scam victims more fairly and in a manner that is in keeping with its Charter’.

Charles Randell; Pic: FCA

Google ‘lambasted’ by chair of City watchdog

At a press conference following their annual meeting last week, the Financial Conduct Authority’s chairman Charles Randell said the number of fraudulent adverts which appear on Google search engines (and, presumably, others) was “deeply frustrating” and an “unsatisfactory situation”. It’s an issue that TTF had raised directly in an evidence session to MPs’ pension scams inquiry earlier this month.

Mark Taber, one of our members, has been campaigning against Scam Ads since at least February 8th. A tweet he published at the weekend demonstrates perpetrators behaving like a mole in  whack-a-mole. I have reported it [ an alleged scam ] at least 30 times now & they simply move the site to a different domain each time the last one is blocked”, he wrote.

Last week, he flagged up just how much research he’s been doing: I have reported over 400 scams on GoogleAds to the FCA so far this year with no effective action taken.”

And while improvements to the law would be sensible, regulators can also ‘do much more using existing laws’: “For example prosecuting advertisers for FSMA s21 criminal offences.

Paul Lewis; Pic: Twitter

‘Ridiculously-named’ Action Fraud in £67m overhaul

Investigative journalist Paul Lewis summed up very well how ‘Action’ Fraud is to be replaced: “It was a black hole in which fraud reported by the public disappeared. Fraud is now so huge the new body will need massive resources or suffer the same fate.

“The scandal is everyone in the professional fraud prevention business have known it was hopeless for years. I have been complaining about its inaction for at least ten. And it is still there doing almost nothing while thousands are robbed. … I don’t see £67m solving the problem.”

Work-in-progress: Proposal for a ‘Joint Task-Force’ on Scams

Everybody working in anti-fraud is aware that there has been a huge gap between talk and action – from regulators and law enforcement –  for years, but what are the causes of that problem?

The lack of focus on criminally-owned enterprises 

I attended the excellent Dark Money Conference last week and was struck by this early observation from Federica Taccogna of FTI Consulting, which suggested to me that  problems are rooted in the law and possibly in watchdogs’ responsibilities and purpose, as well. Ms Taccogna told the conference: “Having been on the side of regulators and enforcement agencies I have seen how often regulation is designed … to fine firms with poor controls, but not so much to take down a firm which is criminally owned.”

She added: “That is the paradox with which we all live … only one example of the many paradoxes in our current legislative environment ; unless we start changing those things we are fighting a battle that’s almost lost.”

Too much data?

At a recent Symposium that TTF hosted, Andrew Beale, Digital Regulatory Reporting Manager at  the Financial Conduct Authority, observed that: “since the [2008] financial crisis, the explosion in regulatory reports, the data requirements, has been enormous.”

He said: This has created issues with parallel data architecture happening within organisations.”

“You’ve then got a challenge in being able to use this information so you create a ‘regulatory radar’.

“You can’t have radar going once a year, because that does not really tell you what the risks are. You have to have a regular pulse check.”

“How do we move this forward so that it is in the interests of consumers, of firms and everybody else?”

A ‘Regulatory Radar’ is a very interesting idea. But, how does the FCA define risk, anyway? Is that risk to firms, or risk to consumers? The links between the two need exploring.

A lack of central responsibility

Peter O’Donnell is Legal Director of solicitors’ firm New South Law, and a TTF member. In his view, pensions became “the go-to source of funds” — for scammers — when the 2008 banking collapse stopped mortgage based investments. Losses were the same because clients had no way of repaying.” He gave TTF examples of how – while there are a lot of watchdogs in the space of financial services regulation- none of them are directly placed to get a grip on the problems that victims experience.

Firstly, there seems to be a humungous regulatory loophole around insolvency: ‘When a firm becomes insolvent, the FCA has no authority or interest.’ The Insolvency Service, meanwhile, ‘can only implement director banishment’, while insolvency regulators ‘do not advise insolvency practitioners to identify or report investment fraud, believing it is the responsibility of the FCA, SFO and Police’. 

What about the Financial Services Compensation Scheme? Unfortunately, that ‘only identifies evidence of non-compliance with financial services regulations’ and it does not ‘report bad behaviour … and if they did, there is no one remit to take action [as] they do not report to the FCA, but to the Treasury Sub-Committee.”

Could FinCEN files herald a ‘Failure to Prevent Economic Crime’ Bill?

The All-Party Parliamentary Group on Fair Business Banking, which TTF helps support, tweeted in the aftermath of the recent FinCEN files leaks that It is time that we implement Failure to Prevent Economic Crime legislation that would give our enforcement agencies the powers they need to tackle this issue.

That idea may sound a bit like something from the film Minority Report, but based on what Fedorica Taccogna says above, and what we have ourselves heard from scam victims, and, moreover, with an increasingly financially vulnerable population in the throes of a pandemic, the UK needs to do something – and, shoud have done something long ago – to get this under control.

Could this mean the watchdog focusing less predominantly, for example, on FCA-regulated entities that have missed a fee-payment? And more on the — perhaps more frighteningly organised — groups of scammers that are criminally owned?

The need for a ‘joint task-force’

All the above – and many other views we’re receiving – have led our members, working together, to formulate the idea of a ‘joint task-force’ to confront scams. The Work and Pensions Select Committee asked TTF to write to them to outline this proposal, during our evidence to them on the 16th. We are putting that material together.

Press Timeline of relevant articles:

28 Sep 2020 – PM urged to show leadership in fight against scams by Amy Austin for FT Adviser
 
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
 
 
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

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

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

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