Banking Sector: Fraudulent Accounts

Alister Jack Excerpts

Tuesday 5th December 2017 Westminster Hall

[Mrs Maria Miller (Basingstoke) (Con)]

I beg to move,

That this House has considered fraudulent accounts and the banking sector.

It is an absolute pleasure to serve under your chairmanship, Mr Hollobone, for the first time that I can recall. I hope we have a full and useful debate.

More than two years ago, a constituent approached me about having been the victim of banking fraud. I called this debate because I have been unable to get the spider’s web of organisations with responsibility for making our banking system safe to act in the best interests of my constituent and bring to justice the perpetrators of a fraud that has left him £13,500 poorer.

The British banking system is one of the most advanced in the world, with an apparent cornucopia of legislation to give customers a comfort blanket of trust. My constituent fell victim to a simple fraud, paying £13,500 into the British high street bank account of an individual who had undertaken to deliver services that my constituent never received.

My constituent, under the impression that this country’s extensive money laundering regulations meant that bank accounts could be opened only by legitimate individuals with established UK addresses, reported the crime to the police when it became clear that the services that he paid for would not be provided, and that he had been the subject of a fraud. He was told by the police that available information about the person who opened the bank account was insufficient for them to proceed with their inquiries, and that the bank account involved had been opened with a provisional driving licence. Following cursory police investigations, it became immediately clear that the individual concerned had never lived at the address supplied to the bank when the account was opened. Indeed, the address given was incomplete.

To this day, Lloyds bank insists that it made no errors in allowing the opening of the bank account used to defraud my constituent, even though the police have confirmed that the suspect has never resided at the address given to Lloyds. Furthermore, for more than a year afterward, the Met police did not pursue inquiries into the crime because they thought, erroneously, that Lloyds would not give them the account opening information that they needed to pursue more thoroughly the criminal involved. In fact, that information had already been given to another police force in Bedfordshire. By the time the error was established, the case was a year old and lines of inquiry were cold.

I have spent two years being handed from one organisation to another in the attempt to have this case properly investigated. I hope that my hon. Friend the Minister can explain how Lloyds can be held to account for the situation. Is he content that a bank account can be opened without a valid postal address for the applicant? Is that not in breach of money laundering regulations? I am not a lawyer, but I have read the regulations, and it would seem so.

The police thought that Lloyds would not divulge the application details, yet they found a year on that that was not the case. Why is there no established protocol for banks and police to follow in fraud cases such as this? Which organisation is responsible for ensuring that Lloyds complied with money laundering regulations when, as a result of the bank’s actions, there is insufficient information for the police to investigate possible criminal money laundering breaches? Is it perhaps time to review banks’ responsibilities when it comes to fraud, and bring them more in line with the credit card industry?

[Mr Alister Jack (Dumfries and Galloway) (Con)]

I commend my right hon. Friend on securing this debate. She mentions the credit card industry. She will be aware that the protections afforded to people using credit cards are far greater than those afforded to people using debit cards or making online transfers. Does she agree that those protections should be extended to forms of banking other than just credit cards?

[Mrs Miller]

My hon. Friend is absolutely right to bring up that inconsistency in how financial consumer protection works. Many people would be taken aback to understand how little protection they might have on a bank account money transfer when, if they simply used credit cards, they would be far more protected. The difference seems reflective of the situation in the past when credit cards were set up, when they might have been seen as a much riskier proposition. The evidence that I am giving suggests that banks are also a bit of a risky proposition when it comes to fraud. He makes an excellent point.

The cost of fraud across payment cards, remote banking and cheques to banking customers and share- holders was more than £768 million last year, involving almost 2 million separate cases. Given the scale of the problem, it is little wonder that the police are not always in a position to act.

For the past two years, I have done all that I can to get justice for my constituent, only to be passed around a bewildering array of organisations. Lloyds bank says that it made no error, yet the police say that the individual who opened the account never lived at the account opening address. The ombudsman says that it cannot investigate how an account was opened, the Financial Conduct Authority tells me that it does not investigate individual cases and Action Fraud and the National Fraud Intelligence Bureau do not investigate crime, it appears, but pass it to the relevant police force. Who exactly ensures that money laundering regulations are followed, and that banks allow new accounts to be opened only with proper evidence of identity and residence?

In this case, the police are clear: their investigation shows that the person who opened the account never resided at the address. I feel trapped in a Catch-22 situation. Lloyds allowed inaccurate information to be used to open an account, but because the identity evidence that Lloyds collected is so poor, the police have no grounds to do anything further, and it appears that only the police can take action to enforce money laundering regulations. The Payment Systems Regulator has admitted that bank fraud is causing customers harm and the industry is not doing enough, and that banks could be doing far more to identify fraudulent payments, but has rejected calls to put more pressure on banks to prevent fraud by making them responsible for reimbursing victims, as is the case with credit card fraud. At a time when the payments industry can spot credit card fraud using algorithms, surely we can expect banks to properly check the ID of their customers.

Financial Fraud Action UK, an industry body, is calling for the payments industry to be more transparent about the scale of the problem and to take a common approach to how frauds are handled. Which?, the consumer magazine, is also clear that banks should shoulder more responsibility for money lost due to fraud, but they need to be incentivised to do so and to focus more on detecting and preventing fraud.

Failure to check account opening details correctly is a serious criminal offence, with a criminal penalty to match. The banking code is clear that documents must prove ID and address. The police say that the reason their investigation is not ongoing is that the person involved never lived at that address, yet no one appears to be willing to hold Lloyds to account, perhaps because the evidence available does not meet the criminal standard of proof.

Will the Minister explain why my constituent should be satisfied? Surely Lloyds has breached its own anti-fraud requirements. Lloyds closed the account because of fraud. In correspondence with me, the bank has admitted that a provisional driving licence was used, but will not confirm what other information was used and why it failed to check the address, given that it was incomplete. Lloyds allowed a fraudulent account to be opened and there appears to be a reasonable case for saying that that is a breach of money laundering regulations. Will the Minister investigate, or at least tell me who might investigate? I have tried for two years, but I simply cannot find out who that might be.

Some cases similar to my constituent’s have received compensatory payments from other high street banks because of the investigative journalism of somebody at The Daily Telegraph. I find it a miserable state of affairs when we rely on journalists’ intrepid work to ensure that our banking system is fair and accountable.

In February 2016, the Home Secretary, now the Prime Minister, established a fraud taskforce. Can the Minister update the House on what has been done through that taskforce to stop banks allowing accounts to be opened fraudulently? My constituent, who quite rightly wants to protect his privacy, needs to have justice, but he also wants his experience to lead to changes that will help to stop this situation happening to many other people.

Devolved Powers in Scotland

Alister Jack Excerpts

Tuesday 17th October 2017 Westminster Hall

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I am delighted to take part in today’s debate, and I commend my hon. Friend the Member for Stirling (Stephen Kerr) on initiating it. Devolution should have been a good thing for Scotland, bringing power and decision-making closer to the people. Holyrood has evolved to be one of the most powerful devolved Parliaments in the world, and I for one welcome that process, but it does mean that the Scottish Government must face the reality of spending within their means. Every time the SNP objects to a reduction in public spending, they have a simple solution: increase taxes to pay for what it is promising.

Devolution does not and should not stop at Holyrood. What we have seen, particularly over the past 10 years, is an increasingly powerful Scottish Parliament refusing to hand over any powers to local authorities. In fact, the reverse has often been the case. The current SNP Administration in Holyrood have been one of the most centralising Governments in recent years. Most people in Scotland do not feel that decision making has been brought any closer to them.

[Mr Alister Jack (Dumfries and Galloway) (Con)]

Will my hon. Friend give way?

[John Lamont]

No, I have got only a short amount of time left. In many cases, decision making has moved from Westminster to Holyrood. Scotland has become one of the most centralised countries in the western world. The vast majority of economic decision-making powers are kept by the Scottish Government, and councils have been relegated to little more than service providers. Council oversight of policing has been all but destroyed by the creation of Police Scotland. Local sheriff courts have been shut in Duns and Peebles, as have local police station counters. The Scottish Government meddle in hundreds of planning decisions each year, overturning council decisions half the time.

My final point is this: the Scottish Government constantly say that they want more devolution, but it is interesting to see what they do with that devolution when they get it. The answer is nothing. The Scottish Government have had the power to raise or lower income tax, but have chosen not to use that power. They have the power to compensate women who have been affected by the changes to pension age, but they choose to do nothing apart from complain about it. Most recently, after years of demanding control over welfare, what did the SNP do when it actually got those powers? It asked the Department for Work and Pensions to remain in charge of payments for three more years because they were not ready for the responsibility. Time and time again, the SNP is failing Scotland because it fails to use the powers it has available.

--- Later in debate ---

[Tommy Sheppard]

Sit down, please. I have not got time.

Despite that adversity, there have been many achievements. Time is short, so let me list just 10. First, in Scotland, people get free medicine. Since that policy was introduced, 34,000 free prescriptions have been issued in Stirling.

In Scotland, we do what we can to make taxation progressive. Higher-rate taxpayers in Scotland today pay more than they do in England. People with larger houses pay more when they sell them than they do in England, and people who live in larger houses pay more council tax than they do in England.

[Mr Jack]

Will the hon. Gentleman give way?

[Tommy Sheppard]

No, I will not.

We use the powers we have got. Crime is at an all-time low. More than 1,000 extra police officers have been on the beat over the 10 years of the SNP Government.

Scottish school students’ highers results were a full third higher than they were 10 years ago—a better performance than in any other part of the United Kingdom.

--- Later in debate ---

[Mr Sweeney]

They delivered it in the face of intransigence. They failed to rise to the occasion.

The hon. Member for Angus (Kirstene Hair) talked about NHS cuts, but did not propose to use the Scottish Parliament’s powers to deal with them meaningfully. Conservative Members talk about NHS cuts, but I have heard repeated claims that they have no interest in using the Scottish Parliament to deal with them meaningfully. My hon. Friend the Member for East Lothian (Martin Whitfield) said that 19% of Scots feel that the Scottish Parliament has not risen to the occasion; in fact, they wish to abolish it.

We have to raise our game. We have to look at what we can do to build a credible devolution settlement. We need to use the Scottish Parliament’s powers to maximise the benefit for the Scottish people.

[Mr Jack]

Will the hon. Gentleman give way?

[Mr Sweeney]

No, I do not have time—sorry.

Why has the SNP ignored the will of the Scottish Parliament five times since 2016 on key issues pertaining to things such as the public sector pay cap and raising tax in Scotland to deliver a progressive outcome? The hon. Member for Glasgow South West (Chris Stephens) talked about workers’ rights, but why is it that only the Labour party has consistently voted to lift the public sector pay cap in both Houses? That is clearly the case, and yet the Scottish Parliament only responded as a result of Labour pressure. The SNP’s record in both Houses is clear. [Interruption.] Its record reflects that, I am afraid.

The only real, practical and progressive measure for tax reform in the Scottish Parliament has come at the behest of the Labour party. Proposals for progressive taxation—potentially raising up to £600 million extra a year in Scotland—would deliver real, meaningful reform, because it would end austerity in Scotland. We would also add £5 a week more to child benefit, which would raise 30,000 children a year out of poverty. That is the opportunity in front of us today.

I am a child of the devolution settlement—I was only seven years old when the vote took place. We have to remember Donald Dewar’s words: it was not an event, but a process—