In the wake of Santander being fined £32.8 million (c.$41.35 million) this December by Britain’s Financial Conduct Authority (FCA), over mishandling thousands of dead customers’ money in their probate and inheritance processes and not treating their next of kin “fairly”according to the regulator, news reached me that Santander U.K. had frozen a 92-year old’s bank account for almost a year, making them almost homeless with no access to their savings.
The British arm of the largest Spanish banking institution in the world, apologized over the failings after being hit with the fine for retaining millions of pounds back of deceased customer accounts after their deaths – in the probate and bereavement process. In one case they had held onto money for 21 years. This was among 40,428 customers who were directly affected as the bank had failed to transfer a total of £183 million (c.$231.8 million) of funds to beneficiaries when it should have done.
The bank promptly transferred the majority of customer funds in the aftermath and according to Nathan Bostock, CEO of Santander U.K., have “made significant improvements to our whole probate and bereavement process.”
But some may be wondering how it ever come to pass in the first and how the bank was able to return the money so swiftly after being fined. Moreover, if they have done this to the deceased, what about the living and should that be explored as well?
At the time, Bostock said: “We have now transferred the majority of customer funds…ensuring we provide both a sensitive and efficient service to our bereaved customer representatives and those who are managing the estates of people who have passed away.”
Mark Steward, the FCA’s executive director of enforcement and market oversight, stated in a press statement on December 19 from the regulator: “These failings took too long to be identified and then far too long to be fixed.” For reaching an early settlement Santander had its fine reduced by 30%, otherwise the bank could have faced fines of almost £47 million (c.$59 million).
Santander breached Principle 3 and Principle 6 over more than a three-year period (from January 1 2013 and 11 July 11 2016), by failing according to The City watchdog to “take reasonable care to organize and control its probate and bereavement process responsibly and effectively, with adequate risk management systems, and by failing to treat its customers and those who represented them on their death fairly.”
In particular, Santander’s probate and bereavement process contained “weaknesses” that resulted in it “failing to effectively follow-up on communications” with deceased customer representatives, which increased the likelihood of probate and bereavement cases not being closed.
But it is not the first time Spain’s biggest lender, which has long had one of the lowest core capital levels among its banking peers and saw its share price decline around 28% last year, has come a cropper and been fined. It counts Abbey National in Britain as a member of its group (a brand that ceased in 2010) and Bradford & Bingley, which was nationalized in late 2008 in what shareholder action group, BBAG, fighting for investor compensation have argued was a dubious act.
Back in early 2015 Santander’s UK arm was preparing for a compensation payout of £45 million (c.$56.7 million) following its fine for offering unsuitable investment advice to customers. And, a year before in March it was fined £12.5 million (c.$15.75 million) over poor investment advice.
In 2013 it topped the bank complaints list from the then newly named Financial Conduct Authority (FCA). And, a little further back (February 2012) it was fined £1.5 million (c.$1.9 million) over the level of Financial Services Compensation Scheme (FSCS) cover for stock market-linked bonds and responding too slowly to customer queries (over some two years).
The FSCS is the U.K.’s compensation fund of last resort for customers of authorized financial services firms offering compensation of up to £85,000 (c.$107,000).
Frozen Bank Accounts
The above looked largely at Santander’s probate and bereavement processes as well other historical weaknesses. Now we turn to the living and the case of one Daphne Fisher, a 92-year old living in sheltered housing in Bushey, Hertfordshire, who has around £7,000 (c.$8,812) in her current account with Santander. And, that is about all she has to her name.
For around the last nine months (since April 2018) she had had her bank account frozen by Santander – without explanation – over what are described as “anomalous” transactions after reporting her cheque book stolen. In fact, the cheque book was not lost and had been mistakenly reported by Fisher.
However, this did not stop the bank putting a block on her account over this entire period and over this Christmas and New Year (bar 5 minutes to allow a £200 (c.$250) withdrawal), which could have meant she was not able to eat or have gas to heat her dwelling. Potentially she could have been on the streets.
In fact, lack of bank access lead to the bailiffs being called to her home because she could not pay the gas bill, which besides still not having been paid caused stress (although a cheque to the supplier had been written to British Gas in June 2018).
A cheque written to her 71-year old son, who has compiled a potted history of the events and communications between the bank and himself that I have seen, reveal a number cheques – including British Gas and her son – have been stopped (even though funds were available). One cheque for £1,400 (c.$1,762) was stamped “PAYMENT STOPPED – AWAITING CONFIRMATION – PLEASE REPRESENT” on August 31, 2018, despite sufficient funds being available.
One letter delivered by hand by the son on behalf of Mrs Fisher to Santander’s branch in Stanmore reads as follows:
“I am advised by the recipient of a cheque I issued to my son, which you have seen fit not to honor. I have funds in my account and you are holding my money and not honoring my instructions. You have made my ability to live untenable and my son is looking after me with everything – including paying my bills. I wish to close my account with immediate effect…and transfer the funds to the following payee.”
In a dossier half an inch thick detailing every significant event leading up to the present day around this distressing saga contains a series of emails, letters and telephone communications – over 30 in total – between the arthritic mother, her son and Santander from April last year.
In the past month or so, a letter from a Finance Director at Santander has “dismissed” Fisher’s son and stated that they will not talk to him.
Now I know freezing of customer bank accounts can happen what with issues around money laundering, KYC or proceeds of crime, but to deny a 92-year old access to the relatively small sum of money – all she has in the world – seems bizarre, puzzling and clearly distressing for the parties concerned.
Santander’s response has effectively been to say they are not at liberty to reveal why the account has been frozen – even after three visits by the mother with her son, a qualified chartered accountant in the West End with some 40 years experience, who told me when we met: “I have never experienced anything like this. And, I, if anyone – a chartered accountant – should have been able to resolve matters given my accountancy background…but no.”
This is an accountant with experience who has dealt and corresponded with the HM Revenue & Customs (HMRC) by email almost on a daily basis over the years, which he pointed out: “HMRC have no problems with that.”
Exasperated at the situation, he added: “They are totally dismissive. And, in the end they [Santander] wouldn’t talk to me and nor would they write to me. They had previously told me they don’t accept letters and yet they’ve written to me. They’ve informed me I don’t have any authority over my mother’s account. However, they’ve relied on things I’ve said regarding my mother’s capacity. Frankly, what right do they have to make that decision?”
Santander’s branch in Stanmore, north London, told Fisher’s son “we don’t correspond by email.”
Even bringing the 92-year old to the branch to resolve matters when the account was under review yielded no more progress, before being told by the bank: “We have made our decision and that is final.” Added to that the account holder’s son was informed “we are not client facing.” It’s like the computer says “NO” and matters are in a black hole.
Furthermore, letters the bank said that they had sent were not received and a promised visit by bank officials from Santander to Fisher’s home never materialized.
Having already got power of attorney for health and care, he has now applied for power of financial attorney (late November 2018), which is the process of being arranged.
He added: “On the one hand they [Santander] say they cannot listen to me because I am not authorized. Yet on the other hand they have taken what I said as being the reason why they closed my mother’s account. How does that work?”
The only way to get access to the funds would, it seems, be when Mrs Fisher dies. And, this is where matters stand today.
However, he and his mother are not alone. A few years ago in 2015 the Daily Telegraph reported that the Financial Ombudsman Service, the U.K.’s official expert set up by Parliament to sort out problems with financial services, had received around 20 to 30 complaints per month from individuals who have been locked out of their accounts without any explanation.
The newspaper stated: “On this basis, given the small proportion of complainants who raise cases with the FOS in other areas, the number of people booted out by their bank is likely to be in the hundreds every month.”
Martyn James, an FOS spokesman, commenting at around this time said: “We see a steady stream of calls and concerns over banks closing consumers’ accounts. The most frustrating thing for people in this situation is the bank does not have to give a reason for closing the account – and banks rarely do, or sometimes can’t.”
Bank Processes & Regulation
Part of the problem, is that from the bank’s perspective, they have become increasingly wary in recent years of the fines they could face if they fail to detect obvious fraud and money laundering – and particular in the U.S. It is process labelled “de-risking.” At the same time one wonders why Santander could not detect issues around their probate and bereavement far sooner, and only stood up once being founding wanted by the FCA.
For the banks, detection is based on certain computer-detected patterns of behavior on an account and the anomalies that can be thrown up as a result.
Moreover, as an unintended consequence of onerous regulation is that it is often not possible for a bank to explain say why it has taken such action like closing an account – due to so-called “tipping off” rules – that are designed to prevent criminals knowing that the authorities are on to them.
David Woolcock, Director, Business Consulting at Eurobase Banking Solutions, which specializes in treasury management and dealer/trading support solutions, commenting on this latest situation [re. Fisher] said: “It is a story of false positives by a computer. Until the fines the FOS and others can levy for incorrect closing of accounts are an equal deterrent to bad behaviour to the fines levied for money laundering, controls failings it will continue.”
He added: “One can see parallels in wholesale Financial Markets. But it is galling to see the very people the FCA and other national competent authorities are meant to be protecting, suffer from the overzealous application of regulations enforced by large fines. It is time we moved on from the events of 2008-2015 and encouraged banks to use common sense rather than being mere slaves to the computers and having to enact what the machine flags up.”
It is surely a sad world when it is the retail customer that ends up being unable to get proper redress, while a larger institutional one does because they can initiate legal action and sue.
As Woolcock put it: “To my mind this should be investigated just as thoroughly as a financial market misdemeanor such as LIBOR rigging and fines of similar significance levied on those who inappropriately freeze accounts just based on a false positive.”
This whole issue around freezing bank accounts – and in particular the elderly and vulnerable – may just be the tip of the iceberg given the cases that actually surface. The bereavements and probate issues with Santander has now passed, but the case of Daphne Fisher could just be a precursor to an immeasurable larger number of people who are simply brow beaten by their banks because they do not have the money to fight.
If you have also experienced a similar experience having your bank account(s) frozen do get in touch.