My Lords, the UK is recognised as having a world-leading system for combating economic crime, creating a secure and transparent business environment. In response to the disruption caused by Covid-19, the Government have taken unprecedented steps to support business cash flow, including the Coronavirus Business Interruption Loan Scheme and the bounce-back loan scheme. These are helping to support small businesses suffering temporary cash-flow issues by providing the finance they need to get through this challenging period.
My Lords, we all support security checks by banks to prevent fraud and scams. However, there seems to be evidence emerging that some banks are routinely delaying transfers by holding up payments in the name of security. It is apparent that transfers are being frozen by banks without any adequate reason being given. Complaining is then made difficult by inadequate staffing or working from home, with long queueing on the phone. False promises of jam tomorrow are made. In some cases, the delay is blamed on HMRC, which blocks the payment with some kind of flagging mechanism on the account. Even when cleared, removing the flag is woefully slow—over two or three weeks, in one example, allegedly because HMRC is inundated with work. This is not good enough. The Minister knows that cash flow is the lifeblood of business, and these blockages in companies’ financial arteries are haemorrhaging British jobs. I ask the Minister: should there not be a duty on the banks to notify card-holders immediately when transfers are delayed and put on hold like this? Could the Minister advise the House on whether the banks profit by returning possession of these funds, which must amount to significant sums at any one time?
My Lords, there are circumstances where a firm may not be able to process a transaction immediately—in particular, where there are suspicions of criminal activity such as fraud or money laundering. The regulations in this area require checks to be proportionate to the assessment of risk. I reassure the noble Lord that, in such cases, banks should not be profiting from the holding of payments. On the question of disclosure, as this is potentially about fraud or other criminal activity, disclosing the holding of funds for these purposes may prejudice the investigation that is taking place.
My Lords, I declare my interests as set out in the register, and add to the concerns of the noble Lord, Lord Mackenzie. Can the Minister look at a mightily odd situation whereby Barclays Bank, on behalf of the sector, would welcome clarity and the need for urgent regulatory reform in a certain regard? Is the Minister aware of the term “politically exposed persons”—PEP, in the jargon? What is meant by it, and why does it exist such that it affects the ability of that bank being able to open a bank account and, additionally, MoneyGram not effecting a transfer of €300 to Sierra Leone for a well-developed SME fintech start-up that would have brought tax revenues and employment for the UK and driven opportunity globally to UK SMEs but which has, regrettably, driven the platform offshore?
My Lords, I am aware of “politically exposed persons”. Under the money laundering regulations 2017, firms must assess the risks posed by those customers on a case-by-case basis and tailor their enhanced due diligence measures accordingly. The FCA has published guidance explaining what these obligations look like in practice. Furthermore, the guidance is that UK politically exposed persons should be treated as low risk, unless other factors apply.
My Lords, I declare my interests as chair of the independent reference group of the National Crime Agency. Suspicious activity reports are an essential tool in combating financial crime, fraud and the funding of terrorism, but is the Minister satisfied that the NCA has sufficient resources to deal with the volume of such reports? Given that banks are assiduous submitters of SARs, with nearly 400,000 last year, is she satisfied that building societies, with only 22,000 submissions, and solicitors, with fewer than 3,000, are pulling their weight?
Money laundering is a very serious issue, but according to the FSB it comes on top of a worsening late payment problem during the Covid crisis. Can the Minister reassure the House that she will look into this issue, and redouble the Government’s efforts to tackle late payments for SMEs, which have stalled during Covid?
The Government are committed to clamping down on late payments. We made a manifesto commitment that we will deliver on to strengthen the powers of the Small Business Commissioner in this regard. Regarding Covid, there is mixed evidence on late payments. We are seeing evidence of good and bad practice from businesses; the Small Business Commissioner is monitoring this very closely.
My Lords, when a bank freezes a customer’s account without asking the National Crime Agency for consent, there currently is no statutory timetable specifying when they must unfreeze those funds. Does the Minister believe that there should be a maximum time for which accounts can be frozen?
The regulations are not prescriptive in setting out how firms should carry out their due diligence. Instead, they require firms to take a proportionate approach that is commensurate with their assessment of the risk. I think that is the right approach for the Government to take.
My Lords, research this week has shown that billions of bank account details and passwords, for individuals and small and medium-sized businesses, are for sale on the dark web. What discussions have the Minister and her department had with the banks and the banking authorities to improve security for their customers?
In 2018, push payment scams meant that 84,000 victims lost £354 million in lost funds. The European revised payment services directive is due to come into force in the EU on 31 December 2020 to combat this, but for the UK this has been delayed again, until September next year. Why do the Government think that UK customers should be more vulnerable to online fraud and scams than those within the European Union?
My Lords, the UK takes all fraud, including APP fraud, extremely seriously. In the UK, we have set up the contingent reimbursement model code for APP scams, which ensures that, where victims are of no blame, they are refunded the payments that they lost out on.
My Lords, I recognise that banks with automated checking systems will have been flagging up the new types of payments that they have never seen before as potentially suspicious, but has the department had conversations with the banks to focus on using new technology which can push the suspected transactions through faster for issues such as CBILS loans?
My Lords, in respect of CBILS loans and other payments, we are not aware of any delays in the payment systems causing problems for businesses. More broadly, we are looking at the rapid technology developments in this area and we are working with the Financial Policy Committee on a payment landscape review to look at the infrastructure and regulation, to ensure that this is keeping pace with the development of technology. We will be publishing a call for evidence on that matter shortly.
Barclays Bank now has adverts urging people to use card payments rather than internet transfers, presumably to avoid fraud, but does it not also mean that they profit from an interchange fee at the expense of retailers? Is there any way that the system is not biased against SMEs?