Financial Services and Markets Bill (Second sitting)

Sally-Ann Hart Excerpts

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Peter Grant]

Q Is there a need to specify in the Bill, or to enable in later regulation, a widening of the mandatory compensation scheme to types of scams that we do not yet know about?

Paddy Greene: Yes, I believe there is. It is right that the Bill starts with faster payments—I think 87% of APP scams are run through faster payments. We do not want to delay action. It has taken too long: it has been six years since our super complaint to get to this point, so we must not slow that down. The revisions—the two-month and the six-month provision in the Bill—are ones that we absolutely endorse. As I said, we do not want to slow that down.

We need to make sure, though, that there is an obligation for further action—for example, to look at CHAPS payments. UK Finance figures show that 79 million on CHAPS and on-us payments are already there. We know that scammers and fraudsters are very good at adapting to change, so they will move. I know there have been some debates about what the Bill does or could allow, but we need to make sure there is an obligation so that we know what will happen next. Just because there is provision for the regulator possibly to act in the future, that does not mean the regulator will—there is a lot of pressure on regulatory time and resources—so we would really like to see some clarity on what happens after the changes to faster payments are made. As I said, this is the opportunity to look at the future. We know that change is happening, so we should set out a timeframe for what happens next.

[Sally-Ann Hart (Hastings and Rye) (Con)]

Q Good afternoon. We were just talking about access to cash and the proposals in the Bill to safeguard access to cash and free ATMs. As an MP who represents a rural constituency, I am concerned about my residents being able to access cash. How far do you think people should be expected to travel to access free cash, or cash? Is it geographically dependent? Would you treat regions separately, on density of population?

Paddy Greene: I think we need community-based solutions. The fact is that it will not be one-size-fits-all. We need to recognise that communities have different challenges. When we look at the voluntary solution that the industry has put in place, it accepts that, first, we need not only a geographical spread but a community access point. We need the ability for communities to request a review of access in their areas.

Secondly, we need a raft of delivery channels. That again gets to the point of what is fit for purpose. An ATM might well be suitable in one town, but it might not be suitable for another town for a variety of reasons, be that geographical or the demographics of that part of that society. I do not think it is one-size-fits-all. It is very important that we get the policy statement from the Treasury soon, so that we and you can scrutinise properly what the close details will be, but it should be a basic geographical spread, with the option to interrogate further those who are not captured by the geographical spread and to ensure that we do not inadvertently leave people behind.

[Sally-Ann Hart]

Q So you are not necessarily specifying a mileage.

Paddy Greene: We need to acknowledge that if, let’s say, you came down to a certain kilometre base that might sound reasonable in broad terms, it would under-serve some communities, so we need to be alive to that.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Q I thank Which? for all the work it has done about the imperative of free access to cash. I do not think any of us are surprised that the Post Office announced that it had £3.45 billion taken out in cash in August, which is the highest figure since its records began. Does the Bill ensure that people will have free access to cash, or is there a need for an amendment to be very specific about that?

Paddy Greene: I think we need to be specific about the need for consumers to have free access to cash. I have concerns that the Bill could be interpreted in a way that undermines those objectives. We absolutely welcome the provision of cash legislation and I am very happy to see it here, but this is our opportunity to get it right. Consumers need confidence that they will have free access.

--- Later in debate ---

[Peter Grant]

Q A number of transparency and anti-corruption campaigners regularly say that London has become or is in the process of becoming one of the go-to locations of choice for money laundering and similar activities. Is that a concern that you think is grounded in fact? Or is it just an urban myth with nothing behind it?

William Wright: I will have to fall back on saying that it is not something I have specific expertise on. I have opinions and views. I have recently read some of the works by Oliver Bullough on different aspects of this—“Butler to the World” and “Moneyland”—and it made me quite angry to read them, but it is not an area where I can claim any professional expertise to answer a question in this setting.

[Sally-Ann Hart]

Q Good afternoon. I will pick up on a few things in respect of the competitiveness of the UK financial markets. Our competitiveness is really important for our economic growth; do you think the Bill goes far enough with regard to the deregulation of existing EU rules? When it comes to new regulation, does the Bill enhance the ability of Britain’s financial services to be agile and dynamic and to look at the best possible outcomes? We are very good in Britain at gold plating our rules and regulations, so we need to make sure we are not putting ourselves on the back foot and can be the most competitive, agile, dynamic market.

William Wright: That is sort of the trillion-dollar question, isn’t it? On EU rules, the Bill and the huge amount of work that the Treasury and others have done over the past three years address the obvious low-hanging fruit—the obvious areas of EU regulation and the framework that were not appropriate for the UK market, which has a unique dynamic within the EU. Most of those areas have been well addressed in the Bill.

On looking ahead at competitiveness, the Bill does create a more agile and nimble framework. By definition, one would hope that the UK can act more swiftly than the EU, and we are already seeing some signs of that. Again, it gets the right balance by making competitiveness a secondary objective and not a primary objective. It gets the right balance to ensure that it is something considered by supervisors and regulators but not something that overrides the fundamental purpose of supervisors to ensure a stable financial system that is competitive within itself, and where customers get appropriate protections.

We need to be very careful, in the debate on competitiveness, about assuming that competitiveness is a mechanical outcome of regulation and tax. One of the lessons we can take from the last few weeks is that a very important element of competitiveness is credibility, predictability and the robustness of independent institutions. It is important to bear that in mind when we talk about competitiveness.

In the short term, the biggest competitiveness threat to the UK—this comes back to the Minister’s opening question—is probably from additional pushback and pressure from the EU as it requires more EU business to be conducted inside the EU. We have this interesting dynamic: the UK is increasingly focusing on making people want to do business in the UK because it is an attractive environment, whereas the EU in many areas is trying to attract business by requiring people to do it there. We also need to be very careful in this debate—

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank our witness on behalf of the Committee.

William Wright: Thank you.

Examination of Witnesses

Robert Kelly and Robin Fieth gave evidence.

--- Later in debate ---

[The Chair]

Thank you. Does anybody on the Government side wish to open the questioning?

[Sally-Ann Hart]

Q It is not a general question, but I want to ask about push payment fraud and APP. If we set a specific amount for APP fraud reimbursement, would a suggested £1 million limit encourage fraudsters to try to act like the victim? Would a limit set that high be an incentive for fraud?

Mike Haley: Yes. One of the issues with a contingent reimbursement model in any compensation scheme is that it is not a fraud prevention initiative in itself; it really just says who suffers the risk of the fraud. It passes the individual loss on to the banks. The emphasis is on a large amount that you could get away with without thinking that you have taken it out of an individual’s pockets; a faceless bank will pay up to £1 million. Any limit of that size reduces any moral questions a fraudster might have about who they are stealing money from.

[Tulip Siddiq]

Q Thank you for coming to give evidence. You do not need me to tell you the amount of money directly stolen from people’s bank accounts through fraud and scams—a record high of £1.3 billion, as you will know. Why do you think we have reached that amount?

Mike Haley: There are three interconnected reasons why scams have reached such frightening proportions. First, the reach of social media and online platforms means that scammers and fraudsters can reach millions of people—marks and vulnerable people—much more effectively.

Secondly, we have seen organised crime turn its hand to fraud because it is a low-risk, high-return crime. Their skills have grown in something called social engineering, which is how they to persuade someone that they are calling from the bank or from the police by impersonating others. They have become very skilled in that.

Thirdly, faster and instant payments mean that once a fraud has been successful, and you mandate a payment through your bank account, it is very hard for banks to tell that that is a fraudulent transaction, because it has been mandated by the customer. Then, there is a network of money mule accounts, which are either accounts that have been set up for those proceeds to go through, or accounts belonging to people who have been duped into allowing their accounts to be used for that money to go through. Instant payments mean that that is untraceable very quickly. I remember investigating a mass fraud—[Interruption.]