Sunday, May 03, 2015

Why I am ashamed of the Devon and Cornwall Police.

I am publishing a case-study of the experiences of a lady who has become a regular correspondent with me. Her story is a scandal, a modern morality tale of our times. She deserves so much better but she is being let down by every agency set up to deal with financial misfeasance. It is cases like this that diminish us, and bring the agencies of control into disrepute. But first, I will let her recap.....

“...In March 2006, having discussed our financial circumstances with **** Financial Management Ltd, my husband was told by their mortgage advisor ****** ****** our monthly outgoings could be dramatically reduced if we agreed to switch our existing £725,000 mortgage with TMB to an interest only discounted mortgage with the Bank of Scotland and restructure our short term borrowings.

He advised us to increase the debt secured against our home by firstly taking a further £65,000 by way of a Bank of Scotland further advance, secondly by making use of a £40,000 draw down which, underwritten at outset, would be made available to us after three months of regular monthly interest payments and thirdly by taking a three month payment holiday for which we would also be eligible after making three monthly interest payments.

His recommendation was to use all the additional funds raised against the remaining equity in our home to repay credit cards Keen to alleviate his cash flow problems at a time when the terminal illness of two of his closest relatives (his mother and brother) was making it impossible to divide his time effectively between the needs of his family and the demands of his business, my husband agreed.

  • After a financial fact finding telephone conversation with my husband, the mortgage application (which we never saw) was submitted online by the broker whom we never met using false information which was tailored to fit the Bank of Scotland’s underwriting requirements. We did not supply the information the broker wrote on the application form .There were no acquisition costs to pay, neither were there solicitors or surveyors to instruct as the cost of the valuation and the conveyance, along with instructions, were either taken care of by the lender or added to the advance.
  • On 30 March 2006, after being told by the broker verbally (again by telephone) we had received a mortgage offer for £790,000 from the Bank of Scotland as a result of his submitting our application on line we were sent, and duly signed, the declaration page and the direct debit mandate of an otherwise blank application form. There then followed another declaration sheet, once again without a completed application form, approximately two weeks later
As a result of his efforts, the broker earned almost £4000 and we, unwittingly, agreed to move from a very tight corner which could have been rectified by the sale of our house, to an impossible situation amounting to tens of thousands of pounds in arrears; a £217,000 mortgage shortfall which occurred from the forced sale of our home in 2009 and six long years of battling with an unsympathetic bank while trying to establish precisely what happened to put us in such a position.  

Had HBOS not inadvertently sent me a copy of our original application form (minus the declaration pages) by way of an explanation to some wildly inaccurate claims they were making about the original purchase price and original purchase date of our house in response to my over valuation complaint to them, I might never have discovered the fraudulent nature of the information the application form contained.

This evidence first came to light in January 2013 and, as a result of a complaint I then made to the Financial Ombudsman Service about overvaluation, irresponsible lending and the falsified information on our mortgage application, I was told (in January 2014 after a full FOS investigation had been completed) my case should have cited the mortgage broker and not HBOS.  Needless to say the FOS were unable to uphold my complaint as it was deemed HBOS were faultless because they were not the appointed advisors for the mortgage sale.

The application form which ************ completed states that the mortgage product applied for was a sale he “advised” as a representative of **** Financial Management Ltd.  It also states our accounts were available and the mortgage was not self certified.  It goes on to claim the following;
  • ************** had face to face contact with both my husband and I during the application process. This is completely untrue. We have never, on any occasion, met ************ and all communications between my husband and ************ were via telephone, email, fax or post. I have had no face to face or telephone contact with ************.
  • Both ************and **** Financial Management claim they saw our original passports for money laundering purposes. This is completely untrue. We were merely asked to send photocopies of our passports and a council tax bill both of which have been signed off by **** Financial Management in handwriting which does not appear to be ************'s.
  • Our earned income is shown on the application form as approximately 249k plus 75k with a further 50k in rental income for the years 2005, 2004 and 2003. Our actual income, as illustrated by our company accounts and Inland Revenue supplied tax returns, amounted to little more than 50k per annum in total for the years stated.
  • The purchase price and purchase date of the property is shown as £890,000 in 2004 when in fact it was purchased in 2000 for £250,000.
  • The age of the property is shown as 20 years old when in fact it could be as much as 300 years old or more and part of the property is thought to have been recorded in the Doomsday Book.
  • The application states the property has five bedrooms and three living rooms when it actually has four bed rooms and two living rooms
When I reported the details of this fraud to the Bank of Scotland, I was advised never to contact them again. Next I reported the matter to the FCA who were insistent that what had happened appeared to be fraud and therefore beyond the remit of both themselves and the FOS. The FCA advised me to contact the police. This I have done and my case details have been logged and given a crime reference number. The Devon and Cornwall Police advised me to seek legal advice.

Having initially spoken to the Avon and Somerset Police Serious Fraud Office in August 2014 to inquire as to whom I should report this financial crime, I was told the Bristol police had uncovered a similar mortgage broker fraud amounting to 11 million pounds. This week Swinton Insurance Brokers directors were fined £900,000 by the FCA for creating an over incentivised culture which promoted miss selling and wrongdoing. It is estimated they will be required to pay 11 million pounds in customer compensation.

I strongly suspect the same unscrupulous methods have been equally lucrative for **** Financial Management Ltd  but to date I have been unable to get to the bottom of why they were removed from HBOS’ lending panel during my applications processing. Nor have I been able find out if they have been the subject of other similar complaints or any formal regulatory disciplinary action.  So far, I have requested this information from HBOS, ****, the FCA and Openwork broker network support.  My requests have either been ignored or denied.

In the meantime I have, on the instructions of the police, informed the Bank of Scotland (formerly HBOS) that they have been a victim of fraud and asked them to file a police report too.

I have received no letter of acknowledgement or response.

Had ************ of **** Financial Management not falsified our mortgage application to secure us an unsuitable and unaffordable mortgage against our home, we would have had no alternative but to sell it for the £925,000 value the Bank of Scotland surveyor gave it at the time. A valuation which both the Bank of Scotland and the Financial Ombudsman have both later endorsed as fair and accurate in my FOS complaint of 2013...”

What is very clear in this case is that my correspondent has been seriously financially damaged by the unlawful actions of the financial intermediary.
She has been placed in an invidious position as the result of a mortgage she never applied for, and was submitted without her knowledge or approval.

There is no doubt that the fraudulent application was an example of a criminal offence under both the Fraud Act and under Section 17 of the Theft Act 1968. In addition there is evidence of an offence of forgery and of uttering a forged document, all of which have benefited the intermediary.

She has sought appropriate help from every agency capable of assisting her and she has been turned away at every turn. This is happening in a country which is supposed to be planted wall to wall with laws designed to defeat such fraudsters, and yet no-one will get off their ‘delicate positions’ to help her.

In desperation, she asked my advice about applying to the police, and it was I who referred her to the detectives in her home area of Avon and Somerset. Those officers gave her positive assistance and confirmed that they were working on a similar case example. However, for technical reasons, the offence appeared to have been committed in Devon and Cornwall, and she was referred to the police there.

Greatly encouraged by the communication from Avon and Somerset, she contacted another agency, Action Fraud. She says;

“...When I initially spoke to the Bristol contact you found me (through your contact on the Economic Crime Team) D. Sgt.***** of the Avon and Somerset Police, he told me he was investigating a very similar broker fraud in Bristol amounting to 11 million pounds and counting. He spoke with great of enthusiasm for the uncovering of this type of crime so I was very much encouraged. As my case fell out of his jurisdiction (because my mortgage broker committed the offence in Cornwall) he said I should contact Action Fraud so an officer from the Devon and Cornwall police could be assigned to my case. Action Fraud were very careful to record every detail of my allegations and concluded what had happened ticked every box for financial fraud so I remained really hopeful there would be a criminal investigation.

What happened next is almost beyond belief. I recently asked her what was the state of her complaint and she sent me the following email.

“...Without them even looking at the evidence I was told by Devon and Cornwall Police that this kind of fraud it is likely to be too complicated for a court to understand and therefore too difficult for them, with their limited resources, to secure a prosecution. They advised me to seek legal advice before supplying them with any more evidence because they will most likely view my husband and I as prime suspects in the fraud as, in their opinion, we had the most to gain from the falsified application. They also said that even if I can successfully prove I have been a victim of broker fraud, it is primarily a civil matter and not usually a matter the police would deal with. They agreed to reopen the case if I can get a statement from the Bank of Scotland saying they were a victim of this broker fraud too. Needless to say I have been unsuccessful in this regard...”

Subsequently upon querying this attitude, she states;

“...However, after three separate telephone conversations with two different Devon and Cornwall officers it became evident that their mission was not to collect evidence to support my allegations of broker fraud to support an investigation but instead they were very persuasive in their discouragement of my taking things any further. I remember saying, "Surely it isn't acceptable for a mortgage broker to put false information on a mortgage application so he can receive £4,500 in fees," but was told it was going to be just too difficult prove. I even mentioned DS ***** and his ongoing broker fraud case in Bristol but this was only met with further disinterest...”
I am still in a state of shock that this should have been the advice from a major police force in this country, and one from whom I once sought help and assistance in investigating a major complicated fraud, help which was immediately and unstintingly forthcoming from a very overworked team of detectives, who nevertheless went out of their way to help a brother detective officer.

I replied to my friend thus.

“...I have never, ever heard such utter bollocks (that's a technical expression)!

This confirms what I have always feared which is that the police in this country have just walked away from their primary responsibilities towards the populace.

First of all, the question of whether this is a case which a jury would understand is none of their concern. It is a matter, if at all, for the Crown Prosecution Service to make that call, not Devon and Cornwall Police.

Secondly, the suggestion that you and your husband were primary beneficiaries is completely false. You can demonstrate that you did not know what information had been supplied and you did not sign the forms so how do they make this assumption.

Thrdly, it is not primarily a civil matter, it is an allegation of fraud, false accounting and one or two other offences.

They know full well that BoS are not going to give that statement, but in any event, it should be their responsibility to ascertain the BoS attitude.

This is a most awful example of police laziness. They just don't want to spend the money from their limited budgets to follow up these kind of crimes. They should still be utterly ashamed of themselves, I have never heard such utter craven excuses...”

This kind of result following an allegation of fraud is unconscionable. Before D&C could even consider the case, it had to go through review at Action Fraud, who clearly thought it was suitable for investigation, otherwise they would not have referred it to them.

I am wholly staggered that this kind of insouciance should have been demonstrated towards this woman. She has minutely documented her ordeal, complete with full exhibits and records, yet the police were not willing to even begin to make some basic enquiries.

What has happened to the state of affairs in this country that anyone in the financial services industry can seemingly commit alleged crimes with impunity and the police will not even bother to make the simplest investigation?

I have known for years that it was useless to ask for help from the FCA, or the Financial Ombudsman’s Service, who are both too busy protecting the interests of their constituents, but I would have hoped that at least the cops would have seen the injustice of this case and would have made an effort to get involved.

This case and the attitude of the Devon and Cornwall cops has deeply saddened me. There was a time when Devon and Cornwall was a force which stood out in its willingness to think out of the box and adopt new and sometimes untried tactics. It seems those days are long gone.

Wednesday, April 29, 2015

J’accuse the Mafia banking sector of wholesale criminality

Standard and Poor’s report that 2015 will be worst in history for bank fines for outright criminality!

According to a report by Standard & Poor’s, Royal Bank of Scotland, Lloyds, HSBC and Barclays will pay more in fines for mis-selling (institutionalised fraud) and market manipulation in 2015 than in any year to date. 

S&P predicts that the big four’s bill for misconduct fines and compensation for PPI and interest rate product mis-selling will hit almost £14bn this year. 

RBS, HSBC and Barclays are still expecting to be hit with fines for foreign exchange manipulation this year, while RBS is due to receive a multi-billion pound fine for mis-selling mortgage-backed securities. 

S&P believes that this will be the biggest year yet for litigation fines, meaning a record combined pay-out from RBS, Barclays, HSBC and Lloyds. The four banks have borne £42bn in conduct and litigation charges in the last five years, but can expect £19bn more in the next two, according to S&P.

Yesterday’s Daily Telegraph Business section ran a shocking story that not only confirmed these figures, but also set out the statistics for financial criminality in all the British banks for the past 5 years.

In it he notes that S&P now believe that bank fines are now a ‘way of life’.

The statistics for these fines and the crimes they represent make for sorry reading, and the list below identifies the worst offenders and the crimes they committed.

Before reading, reflect, all these offences were admitted from the start – the banks effectively pleaded guilty to these crimes without any contested trials. This is a level of criminality which is so vast and so damaging that I believe the next Government needs to seek a Royal Commission to enquire into this level of blatant thieving.

If crime of this level of seriousness was being admitted in any other business of public sector industry, the Government would be calling for major anti-crime initiatives, police task forces would be deployed, and heads would be rolling across the sector, and people would be going to prison.

1. UBS: £233,814,000 (FX rate fixing)

This huge, nearly a quarter of a billion pound-fine is actually a 30 per cent discount because all the five banks involved in the forex scandal pleaded guilty early in the investigative process. Combined with its fine from US financial regulator the Commodity Futures Trading Commission (CTFC), its total fines were a massive £503m. 

2. Citibank: £225,575,000 (FX rate fixing)

Much like UBS and the other banks involved in the forex rate-fixing scandal, Citibank rolled over early in the case. It was also received a £194.6m fine from the CFTC.

3. J.P MorganChase: £222,166,000 (FX rate fixing)

This bank has featured almost every year for the past five years. However, this is the largest fine the bank has ever received, with combined total fines of £417m over the scandal, including £195m from the CFTC.

4.RBS: £217,000,000 (FX rate fixing)

RBS total fines over the forex rate fixing scandal were £399m including £182m by the CFTC.

5. HSBC: £216,363,000 (FX rate fixing)

HSBC has confirmed it has set aside $378m (£249m) aside for fines - although combined with penalties from the US regulator, HSBC’s total over the rate fixing scandal hit £389m.

6. Lloyds and Bank of Scotland: £105,000,000 (Libor)

2014’s other major financial scandal was Libor, where several banks (Lloyds among them) colluded to fix the London Interbank Offered Rate (Libor) - the rate at which banks lend to each other. 

7. RBS, Natwest and Ulster Bank: £42,000,000 (Failing to provide adequate IT systems)

8. Barclays.  £37,745,000 (failing to properly protect £16bn of clients’ custody assets)

Barclays isn't the only bank to feature twice on this list- but it does so while also being investigated for both the Libor and forex - more fines are expected to follow. The bank was fined by the FCA in September when it failed to protect funds a client had entrusted to them in custody. 

9. HomeServe: £30,647,400 (mis-sold insurance policies)

The only non-bank to make the top 10 this year HomeServe, which was slapped with a massive £30m fine after it was found it had not only mis-sold insurance to its clients, but also failed to investigate claims in a timely manner. 

10. Barclays: £26,033,500 (failing to manage conflict of interests) 

What these figures demonstrate is an era of Organised Crime on a hitherto unimaginable scale. It is clear that these banks, in order to maintain the level of revenues they required to support their over-inflated share prices, had to engage in wholesale criminality to make their numbers.

How is it that no-one has gone to prison for these crimes. How is it that bank senior executives have not been called to account?

Every time we see a Parliamentary Committee sitting in judgement on these creatures, we see them slipping, sliding, evading the questions, sometimes being economical with the truth, sometimes downright lying, but never any question of anyone being required to resign.

While these statistics reflect an unacceptable level of organised crime within these banks, they also reflect an almost complete absence of any kind of pro-active activity on the part of the regulators.

The role of all law enforcement agencies, (and financial regulators do perform a policing function, no matter how much they may deny it and seek to wriggle out of their responsibilities for ‘policing’ the market), is to prevent crime in their market, industry or social sector.

Crime prevention is a pro-active science, where those charged with the duties of regulating the market should be adopting integrated and pro-active techniques and strategies to identify and disrupt such activities in the market, in the first place.

Waiting until the horse has bolted and the cat is out of the bag (how I do love a mixed metaphor), is futile. It means that the regulators are always responding after the event, and always too little, too late!

These latest statistics must be a clarion call to Government, because these fines are being loaded on to the shoulders of the shareholders, and they are not impacting on the most egregious criminals themselves, the banks and their management.

We simply cannot go on watching this pantomime being played out, where fines, the size of which would pay to support the NHS for years to come, are being levied against criminal enterprises who show no signs of conforming to law.

As a matter of course, any bank director whose institution is fined sums of this magnitude should be facing the wrath of the English Courts as well as the demands o out-of-pocket shareholders.

The SFO and the City of London Police should be harmonizing their approaches to these criminal allegations, and should be working out a list of those they would wish to interview.

In no other walk of life would such dishonest and egregious business practices be tolerated.
This must now become a priority for Government – It already is an electoral issue for me!

Tuesday, April 28, 2015

HSBC threatens to relocate its business centre to avoid regulatory requirements.

HSBC has threatened to relocate its headquarters outside the UK, in a move promoted by the Chairman, Douglas Flint, in response to "regulatory and structural reforms", including the requirement for banks to separate their investment arm from the retail divisions, which was instituted after the 2008 financial crash.

The bank has also been hit by the UK bank levy, which last year cost it 1.1 billion US dollars (£730 million), up 200 million US dollars (£130 million) in 2013. Flint's announcement sparked a claim that the "regulatory pendulum has swung too far".

Flint disclosed the review at the company's AGM in London, where the board faced a torrid time from angry shareholders over the potential move. They were also castigated for a series of financial scandals that have engulfed the bank, marking it out as one of the most egregious financial mafias operating out of the UK.

One investor, Michael Mason-Mahon, said: "Which country are you likely to go to? How many countries have you not committed illegal and criminal behaviour in?"

These are, rightly, very difficult times for HSBC, and its aggressive and pompous response to legitimate international concerns at its concerted organised criminal behaviour, does not indicate that they have learned any lessons from their wrong-doing.

OK, so the chairman of HSBC has admitted his shame at the “horrible reputational damage” the bank has suffered following the revelations of the systematic aiding of tax avoidance at its Swiss subsidiary, but he has refused to take personal responsibility for the failings.

I mean, he was only a very senior director of this major bank at the time, but this still doesn’t mean that he feels he should accept any responsibility.

Douglas Flint, who was finance director at the time HSBC took over the Swiss subsidiary, infuriated members of the Treasury select committee by blaming the failings at the Swiss unit on local managers and said that the secrecy surrounding banking in the country made it difficult for him to have a direct line of sight of what has happening at the bank.

If that was the case, why did he not demand access to the information and require it to be shown to him, if he felt he was in charge of business conduct he could not properly identify?

Flint, who has been chairman of the bank since the end of 2010, said: “I believe in personal accountability and I do believe people should be held responsible for what they have direct oversight over when they have failed”.

OK, fine, all well and good, but how does he avoid the allegation that the overwhelming reason he did not ask to see the evidence identified was because he did not want to see it for fear it would implicate him in unacceptable activities which he would then have had to disclose to British financial regulators and law enforcement agencies?

While he said he felt “very ashamed” of events at the bank, he said he would not forfeit past bonus payments in response, telling MPs: “I don’t feel that proximate to what was happening in the private bank.”

Hmmmm, interesting weasel word that ‘proximate’. He should have known what was going on, he should have engineered greater proximity, how else could he have exercised his duties and responsibilities as a senior director?

And what about his noble Lordship, Lord ‘See No Evil, Hear No Evil’ Green, an ordained Tory minister, who has repeatedly refused to answer questions in public about the scandal – citing a “point of principle”. 

Flint added: “Most accountable, I think, are the management in Switzerland. It’s very difficult for people outside Switzerland to get any access to the detailed account-level information in Switzerland. That’s something only the management on the ground can have access to for all the privacy and secrecy reasons...”

With very little respect, that is not good enough!  As Chairman, you are bloody well entitled to know, you ought to know and you should have demanded to know. Not asking taints you and your actions deeply, you are complicit sir,!

Having bamboozled the Parliamentary Select Committee, and not being likely to face any kind of investigation from the FCA, it would seem that HSBC Board members may feel that they have avoided the worst kind of allegation which would under most other circumstances have caused resignations.

Directors of the kidney of HSBC men do not rise to their exalted heights by readily admitting their culpability!

So, instead of adopting a more humbled stance and expressing contrition at the way in which they and their senior executives have behaved in recent years, they have behaved like a spoilt child, thrown an enormous hissy-fit, and started to threaten to relocate their non-retail business to a jurisdiction where they won’t have to comply with a series of regulations designed to make their risky business activities, less likely to bring the entire financial house down, in the event of an adverse market reaction. 

What this demonstrates is that the basic commercial culture of HSBC is designed to avoid as many prudential regulatory requirements as possible, because, presumably, they get in the way of the bank’s ability to make money, quickly, easily and without too many awkward questions being asked!

The reason we have bank regulations is to keep the banks honest, or as honest as it is possible to get. The aim is to ensure that they do not have a sudden rush of blood to the head and run out and stick the entire Treasury reserve on red at the casino in Monte Carlo, or short every trade on the New York Stock Exchange Big Board in an attempt to undermine the market.

Most banks know this, and despite having spent a lot of money with their lawyers and PR advisers trying to oppose these regulatory changes, they will grudgingly fall in line in time.
Not so HSBC it seems.

Well, frankly, if HSBC wants to relocate its HQ to some Asian centre, good luck to them and good riddance.

The reason why I suspect the move is going to be very difficult to achieve is because I seriously doubt that many of the senior executives’ wives will be very happy about relocating to Hong Kong for the foreseeable future, and live under the benign control of the PRC.

Can you imagine what it will be like for these gilded and privileged individuals to be forced to move out of their Notting Hill enclaves and take up residence in some crowded Hong Kong high rise apartment? I mean there is a limit to the amount of Sushi and lemon chicken one can consume!

By setting this rabbit running, HSBC have made a strong public statement that they have no interest in doing business in a regulated business environment and are about to engage in an exercise in regulatory arbitrage.

They, like other banks, are beginning to discover that they cannot make the same level of profit working in a firmly regulated financial arena, so they must look around for a less-regulated environment, where they can engage in their anomic conduct to their heart’s content.

The air will be a lot sweeter without them!