Tuesday, November 22, 2011

'...Father, forgive them.....'

A blog examining the organised criminal nature of the High Street Banking Industry.

When criminologists measure criminal threats to society, one of the criteria evaluated is the volume of loss (or financial damage) such criminality generates. So, we can get statistics about the value of goods stolen from shops, or the value of quantities of drugs seized, because obviously, if a particular activity is causing severe financial loss to the country, then it ought to be taken more seriously, and hopefully, escalated in the threat-value recognition.

When a specific group of individuals or practitioners repeatedly appears in the statistics of criminal activity, as being responsible for the egregious activities identified, the Government and the Home Office encourage the agencies of control to target these people and focus investigative and prosecutorial attention on them.

We tend to call this kind of activity, 'Organised Crime' and it is defined by the UN, among other agencies thus... "... large scale and comples criminal activity carried on by groups of persons, however loosely or tightly organized, for the enrichment of those participating and at the expense of the community and its members. It is frequently accomplished through ruthless disregard of any law...'

Paul Nesbitt (head of Interpol's Organized Crime Group) defined it in 1993 as, "Any group having a corporate structure whose primary objective is to obtain money through illegal activities, often surviving on fear and corruption."

We are living in what I think is now generally agreed to be the worst period of financial constraint since the Great Depression, and every man, woman and child in this country is having to make do with less and less. The Government is telling us at every opportunity that we must get used to making do with fewer social supports, while at the same time, saying that it is trying to help the economy by engaging in Quantitative Easing (printing more money to you and me) in order to get growth started again.

Ordinary savers have found that their savings' rates have dwindled to virtually nothing, and many people are looking to find advice on how to get the best from their limited reserves of money.

So, why is it that at the very time when people need good financial advice most, the British High Street retail Banks appear to be completely immune to this need, and carry on their business as if their clients are merely there to be fleeced?

For many years, it has been one of the great mantras of the financial services industry that the institutions are looking to acquire 'as big a share of the customer's wallet' as possible. This phrase was widely bandied about in the banking industry by executives who used to come to seminars put on by a leading computer manufacturer, and they looked to the IT industry to help them develop software that would do just that, 'get a bigger share of their customers' wallets', and a great deal of time and energy was spent encouraging the development of technologies which would help banks 'up-sell and cross-sell'.

We have had to go through a financial services revolution in this country to get financial institutions to grudgingly subscribe to a theory of 'best advice' for their clients. The regulator has had to issue meaningful warnings about 'treating clients fairly', (an issue you might have been forgiven for thinking was a 'given'). So why is it, after all this time, that so many of the banks and their financial friends are still behaving like a bunch of highway robbers, cheating and stealing their clients blind. Some recent cases are instructive.

Two Barclays bank employees were sentenced to five years imprisonment following their roles in £1.3 million worth of fraud on old age pensioners. Karl Edwards, 44 and Andrew Waters, 26 appeared at Birmingham Crown Court on November 18th 2011, following the fraudulent activities, they received five years each. The court heard that the bankers targeted three victims who were all over the age of 80. Karl Edwards was thought to be a "premier relations manager" whilst employed at Barclays.

In July this year, Another ex-Barclays employee was jailed after he stole more than £600,000 from dead, elderly and ill customers, to fund his online gambling addiction. James Leonard Finnigan, 42, from Twickenham, Middlesex received a four-year jail term at the Old Bailey, having previously pleaded guilty to the fraud. A police spokesman commented: “James Finnigan appeared to target customers who were elderly in the hope of avoiding detection, in some cases going as far as taking money from accounts when customers had recently died.”

How about a greedy bank manager who was given a hefty bonus payment - at the same time as he was robbing customers of tens of thousands of pounds. Liam Allmand was so highly thought of by Barclays Bank for looking after their higher-earning clients that he was rewarded with a £20,000 bonus on top of his salary. But unbeknown to the bank, for two-and-a-half years customer relationship manager Allmand, 27, had been rifling the accounts of his portfolio of 300 wealthy customers.

Former customer relationship manager Liam Allmand was jailed for four-and-a-half years in February 2011, after stealing more than £45,000 from wealthy Barclays Bank customers. He said he was so "clever" even the bank's sophisticated security system took two-and-a-half years to spot his thieving.

These cases were straightforward criminal activities, and although it is tempting to ask why Barclays' so-called sophisticated internal financial crime prevention systems did not identify these activities earlier, the most likely truthful answer will be 'what sophisticated internal systems'?

But what about more inchoate dishonesty, what about the way you treat your clients? If you are behaving in an honest and proper manner with your clients, why would they complain about you? What is it about the High Street retail banking industry that means when you join, you leave your morals, your honesty and your integrity in a pile on the doorstep?

Perhaps it has something to do with the culture of the institution which is being joined!

The consumer magazine 'Which' has just published a report on bank selling practices, which makes for compelling reading.

High street banks are offering poor investment advice and recommending inappropriate financial products to consumers, according to an undercover investigation. Which? sent nine researchers - all aged above 60 and posing as retired savers inexperienced at investing - to get financial advice at bank and building society branches across the UK. The study found that 32 out of 37 advisers made misleading statements about available investment products and appeared not to have a good understanding of the financial risks involved.

Many of the bank employees recommended complicated financial products, and which incur hefty fees to pull money out in the short term, which are considered inappropriate for the average investor near retirement age. Even though financial institutions earn commission on the products they recommend, nearly half of the advisers said there was no cost for their advice.

One of the undercover researchers was told by an employee at Yorkshire Bank, a subsidiary of Clydesdale Bank, to invest £50,000 in a bond without disclosing that this would net the bank £4,400 in commission. Earlier in the year, two of Britain's biggest banks, Barclays and RBS, were reprimanded for mis-selling financial products. Barclays Bank is the most complained-about financial services company in the UK, according to figures released in late November 2011. The bank's customers lodged 8,283 complaints with the Financial Ombudsman Service (FOS) from 1 January to 30 June, of which 5,226 were about banking and credit services and 2,085 about insurance cases.

More than two-thirds (71%) were upheld in the complainant's favour – 67% of the banking and credit complaints and 93% of the insurance complaints, most of which related to payment-protection insurance policies. The data covers a total of 69,841 complaints handled by the FOS in the first half of the year. Of the 100,000 businesses under its remit, 142 accounted for 87% of all complaints.

Banks topped the table, with five groups each receiving more than 3,000 complaints and together accounting for 38,286 cases. Lloyds TSB was the subject of 6,947 complaints, Bank of Scotland 5,804, Abbey 2,493, NatWest 2,379, MBNA 2,298, HSBC 2,177, Royal Bank of Scotland 1,812, Alliance and Leicester 1,786 and Nationwide Building Society 1,149. The FOS was deluged with complaints about unauthorised overdraft charges in 2007 and 2008, when it came to investments and pensions, 63% of complaints were about sales and advice, but a spokesman said the latest complaints focused on other aspects of banking services and charges, most notably PPI mis-selling.

Indeed, PPI issues made up 51% of all complaints to the FOS, of which 75% of those complaints were about selling practices and advice. Remember, when reading what follows, please recall that the PPI scandal was determined to be a wholesale engagement in what is euphemistically called 'mis-selling', which is a misleading way of saying ' wholesale, institutionalised fraud.'

The Financial Ombudsman Service publishes an annual review of the cases it undertakes. In last year’s annual review they reported a 58% increase in the volume of complaints referred to them about payment protection insurance (PPI). The FOS said they hoped that the FSA’s proposals in relation to the handling of PPI complaints would be finalised as soon as possible – and that the improved complaints-handling processes subsequently put in place by businesses would result in a significant reduction in the volume of PPI complaints referred to the ombudsman service over the following year (2011).

Unfortunately, the year did not turn out that way. In August 2010 the Financial Services Authority (FSA) introduced new complaints-handling guidance (its policy statement 10/12) about the assessment and redress of PPI complaints. Some businesses started to implement this guidance but a number of high-street banks decided to challenge it.

We may want to ask ourselves why is was so necessary to challenge a policy statement which was intended to make the PPI resolution simpler, but we must also remember, that banks would rather throw money at any issue which might prevent them from having to spend money on a compliance issue, or to repay customers, no matter what the cost. This is all part of their dysfunctional egregious culture.

This meant that these banks started to issue standard letters to customers from autumn 2010, saying they were unable to decide PPI complaints while legal action was ongoing. How many legitimate claimants may have died during this period is not known. This legal action took the form of a judicial review brought by the British Bankers Association (BBA) – on behalf of a number of high-street banks – challenging the FSA and the ombudsman service.

This massive (and expensive) exercise in gratuitous time-wasting resulted in a judgment which was handed down by the High Court at the end of April 2011 – endorsing the FSO approach, and that of the FSA, to handling PPI complaints. Just as the annual review was going to print, the BBA announced that it did not intend to appeal this judgment.

While awaiting the outcome, most banks that were challenging the case stopped responding substantively to many thousands of complaints. Regrettably this led to delays and uncertainties for the consumers in these cases, and following a report on 14 September 2011, the spectre of the biggest financial mis-selling scandal in the industry’s history doesn’t look like going away any time soon.

Millions of customers have now realised that for years banks have made a killing from selling expensive Payment Protection Insurance to people taking out loans – whether or not it was appropriate. It became so profitable for banks to sell PPI that many customers ended up paying for it without even realising they had it.

Others were sold insurance they didn’t need or couldn’t use, but which still ended up costing them thousands of pounds. Now the banks have been forced to put aside billions of pounds to cover the cost of compensation to thousands of customers after abandoning the legal challenge in the High Court.

The latest figures from the Financial Services Authority show that in many cases the industry is still failing in its attempts to resolve people’s complaints. 'Which?' executive director Richard Lloyd says banks still aren’t treating customers fairly. ‘If the next round of complaints data doesn’t show a dramatic improvement then the FSA must take tough enforcement action against banks whose complaints handling isn’t up to scratch.

‘To ensure that consumers get the redress they deserve the FSA must make sure that all major banking groups are required to review the PPI complaints they previously rejected unfairly. These figures point to the blasé attitude banks seem to have towards their customers. In a properly functioning market banks wouldn’t be able to get away with treating customers like this.’

Of the big four retail banks, Lloyds TSB has the worst complaint record, with 84 per cent over the last six months being settled against them. Royal Bank of Scotland and Barclays occupy the middle ground, with scores of 55 per cent and 52 per cent respectively.

Natalie Ceeney, chief executive of the FSA, puts the statistics into context when she says: ‘These latest figures show a significant increase in the number of new PPI complaints referred to the ombudsman during the first half of 2011. This period coincided with the time when most of the high street banks and some other financial businesses had put PPI complaints on hold, because of their legal challenge against the ombudsman service and FSA.’

So, what are we faced with?

We are examining a market sector that has grown too bloated and complacent for its own good. This arises largely out of the fact that there are far too few retail banks to give the customer any real choice, coupled with an attitude within the institutions, that the ordinary rules of commercial probity and legal compliance do not apply to them. This is exacerbated by the fact that most banks now have difficulty in separating their wholesale from their retail arm. Retail client accounts should be separated and ring-fenced miles away from the casino banking end of the institution.

These institutions possess significant criminogenic characteristics. This does not mean they are all criminals, but that they possess the capability to slip into criminal activity whenever it suits them.

So-called 'mis-selling' is a classic example. Customers were routinely deceived into buying PPI insurance, without a full knowledge of the facts, at a significant cost which caused them loss and damage. Such activity is a crime, it is Fraud, and it should have been dealt with as such. The people who sold the products should have been arrested as should their managers, their directors and their Board members, anyone who had an interest and a position in the selling chain should have had their collars felt. The craven attitude of so many British politicians and regulators towards their relationship with the banks, has prevented this example of blatant criminality from being dealt with as such, yet the damage and losses it causes to the country and its citizens are of grotesque proportions, running into many, many billions of pounds

If a group of any other organised criminals had caused in excess of £9 billion damage to UK plc over just one individual financial product, in any other circumstances, then you can rest assured that huge attempts would be made by dedicated teams of law enforcement, to hunt them down, try them and send them to prison.

Because these crimes are being committed by the banks, no-one raises the issue, and yet, if you apply the definitions I included at the beginning, banks bring themselves firmly within the definition of organised crime.

We have to begin to start seeing some major banks as little more than criminogenic enterprises, who deliberately flout or pay little more than lip service to regulations which get in their way of making profit. They have lost any sense of financial proportion, even those whose existence has been preserved by the tax-payer, and at a time when the vast majority of the country is being forced to undergo financial constraints that are causing significant hardship, they still believe that they are entitled to pay themselves bonuses of obscene proportions even when they continue to report losses.

Pure greed influences and informs all their decision-making processes, and we should see and call them 'Organised Criminals' for that is what they truly are.

Father, forgive them, for they know all too well what they do.

Thursday, November 17, 2011

Re-tooling up the Police

In April 1981, the Metropolitan Police Special Patrol Group were ordered into Brixton with instructions to carry out a dynamic 'stop and search' campaign among the youth of the community. A large number of arrests were made for various street offences by well-drilled officers, and the immediate effect among the Brixton residents was to cause enormous resentment. Police in surrounding districts watched in mounting disbelief as the SPG roared through Brixton like a hot knife through butter, and discussed among themselves who could possibly have ordered this campaign, which was guaranteed to cause social unrest of unrecognisable proportions.

Following the urban riots which inevitably resulted, Margaret Thatcher visited The Metropolitan Police Commissioner at the Yard, and discussed the additional training and the list of new riot equipment they needed, including a '...greater variety of riot shields, more vehicles, longer truncheons ...' (Margaret Thatcher 'The Downing Street Years, p.145.), equipment, they would very quickly receive. The riots, and the immense public fear they engendered, provided the political impetus for the Conservative Government to spend a significant sum of money changing the face of Police public order containment tactics. They knew they would not be opposed in providing the Police with the new, aggressive riot equipment, which up to that point had consisted of a rather cumbersome plastic shield, an acutely uncomfortable hardened helmet, and a cricket box!

It is of some interest to recall that in 1974, while the Tory Party were in Opposition, in the aftermath of the Heath government being brought down by the 1974 coal strike, the Ridley Plan (also known as the Ridley Report), reported on the state of the nationalised industries in the UK. The report was produced and drawn up by the right-wing Conservative MP Nicholas Ridley. In the report he proposed how the next Conservative government could fight, and defeat, a major strike in a nationalised industry. Among his many recommendations were the need to train and equip a large, mobile squad of police, ready to employ aggressive riot tactics in order to uphold the law against violent picketing.

These tactics, including the provision of more dynamic riot equipment (subsequently described as the 'tooling up of the police' by Sir John Alderson, Chief Constable of Devon and Cornwall police), would later be successfully employed during the miners strike of 1984-1985, when the National Union of Mineworkers was defeated by the Conservative Government of Margaret Thatcher.

After the Miners' strike had been crushed, William Whitelaw was quoted as saying; '...Without Brixton, I doubt if we could have defeated Arthur Scargill...'

The riots of Brixton, and later Toxteth on Merseyside, fortuitously provided the requisite degree of public anxiety which would enable the government of the day to engage in a wholesale re-arming of the police, without attracting too much criticism from the Liberal Left who would see it as an anti-libertarian gesture. Police agencies which aspire to 'police by consent' are very sensitive to suggestions that their tactics could be making too great an inroad into possible areas of civil liberties, and how we arm our police in this country has always been a very contentious topic. If we are going to see our police being equipped with new and more aggressive weapons of constraint and coercion, we need to be provided with very good reasons for that change, and rioting, burning and looting can prove to be very persuasive.

In August this year, a black 'gangsta', Mark Duggan, was shot dead by police in Tottenham. He was found to have a converted pistol which the Independent Police Complaints Commission subsequently confirmed was a BBM ‘Bruni’ pistol containing live rounds and it was being carried by Duggan hidden in a spare sock, not one he was wearing.

He was shot dead by a police marksman in Tottenham, North London. He had been stopped by undercover officers as he travelled in a minicab and confronted because they believed he was on his way to ‘use the weapon’ he was carrying. Rumours that he had been ‘executed’ fuelled the riots in the North London community, which spawned copycat violence and looting across the country.

So, it was with no great surprise to hear immediate calls for the police to be issued with rubber bullets and water cannons, for use on the British mainland. The immediate calls for these items to be deployed followed hard on the heels of the inner city riots, when gangs of marauding youths ran amok in commercial centres, smashing windows and looting and burning shops. In the post-disturbances discussion, innumerable commentators have sought to find reasons for the riots and how they could have been better controlled, and among the many calls for action was to issue rubber bullets to the Police.

Ironically, the issuance of rubber bullets to confront the inner city rioters would have been a largely pointless exercise. Baton rounds are designed to disperse dangerous crowds, in static situations, where it is perceived that the threat of potential violence and danger to law enforcement is reaching an unacceptable limit. Then baton rounds are effectively used to break up large numbers of protesters gathered together to confront police. They are not prescribed for use against mobile, small running groups of people such as were seen during the looting sprees. Rubber bullets are a crowd dispersal agent, not a missile to be fired at running groups of youths, because they are ineffective against the mobile rioters, and dangerous to potentially innocent persons who might be inadvertently caught up in the fleeing melee.

So why were there so many dark predictions of the use of rubber bullets during the student fees demonstration on 9th November in London? Why were we subjected to the lugubrious face of Commander Pountain as he pontificated on the theoretical use of rubber bullets to protect his heavily armed and armoured officers. I say theoretical because nobody in the wildest extremes of their imaginations really believes that police are going to fire rubber bullets against students. It isn't going to happen.

This what the police spokesman really said about potential violence at the demonstration.

'... 'However, it would be negligent if we did not plan a response to the small minority who may be intent on disruption and may not intend to be peaceful...'

Regarding the potential use of baton rounds, a police spokesman said: '...There are a range of tactics available if there is criminality and violence associated with the event. One of these is the authority to deploy baton rounds in extreme circumstances. These are carried by a small number of trained officers and are not held and used by those officers policing the route on Wednesday...'

So, there you are, no-one policing the demo would carry rubber bullets. So why raise the issue at all?

Now, in the aftermath of the Tottenham and Manchester riots, the time is ripe for a new paradigm in public order management. It is simply all part of a campaign to 'soften up' the British people to get them used to the potential likelihood of the use of these weapons in the near future, so when they are used, no-one can say they were not warned! And when will that be...?

Well, it won't be very long. The impact of the economic austerity measures has not yet really begun to bite, and will not be truly felt until the first part of 2012. Then, when people begin to feel the true impact of the cuts to their living standards; when they see the inevitable upward spiral of fuel costs; the increases in the cost of food; the erosion of their savings, caused in a big part by the outright criminality of the banks and the savings' institutions as they reduce hard-earned savings by hidden costs and charges; the refusal of the big banks to cut their obscene payments to themselves while engaging in wholesale mis-selling practices, and the host of other issues they will have to face, including the increase in the costs of their children's educations, then we will see the emergence of the anger of the hitherto silent class, the group which up to now has sat silent and carried the financial burden through their taxes, while the government has laid billions of pounds of tax-payer's money on the banks, only to see it disappear again in more balance-sheet reconfiguring and bonus awards.

Then the ordinary people of this country will start to find ways of expressing their anger at the failure of the politicians to manage things equitably and fairly, and when they finally realise the growing disparity between those who are reaping millions in banking bonuses or other dividend windfalls and their increasingly straightened circumstances, then even they will move onto the streets. Oh it will all start peaceably enough, with orderly demonstrations, along the lines of the 'Not In My Name' marches prior to Tony Blair's taking us to war in Iraq, but it will not be long before these marches are hi-jacked by the agit-prop groups, the anarchists, the SWP and all the other groups of the political extremes, who long for physical confrontation with the agencies of control. They will gladly catch a free ride on the coat-tails of the respectable Middle Class, until it comes time to take over.

Remember the Poll Tax riots, which in effect proved to be the Rubicon which Margaret Thatcher could not cross, well these manifestations will be a great deal worse and they will involve very extreme violence. The rioters a few weeks ago learned a lot of lessons about successfully confronting the police, and those lessons learned will be re-enacted, as mobile squads of rioters group and re-group, not staying long enough to be 'kettled', moving from flash-point to flash-point, directed by messages promoted on social media messaging systems (are the police really going to shut down the whole mobile phone network, with all the commensurate costs involved to legitimate users?)

The riots will be coordinated and will involve the escalation of extreme violence on both sides, and as the violence increases, so will the calls for the use of the baton rounds, and the police will be hard-pressed to keep them in check. The Right-wing Press, eager to see these weapons used on the mainland for the first time will shout for their use, and they will be brought into the action. Their inexperienced use will lead to serious injuries, indeed, even possible fatalities, as in Northern Ireland, and this will, in turn, aggravate the whole situation. It will be inevitable as the less experienced and the legitimate protestors begin to witness the kind of violence which has marred so many police actions hitherto, they themselves will start to protest at the kind of behaviour being manifested by uniformed officers, as well as the new groups of plain-clothes snatch squads being increasingly used to take down individuals. In protesting at this kind of conduct, they are more likely to find themselves being 'kettled', manhandled, screamed at, violently pushed backwards, hit on the body and legs with long truncheons and even arrested and subjected to the use of 'reasonable police force', which will tend to have a radicalising effect on even the most moderate protestor!

It is only when the middle classes find themselves on the receiving end of police action that they begin to understand what others have experienced in the past, and usually, they don't like it, and they make their feelings felt at the ballot box. That is why the use of this 'Situationist' style methodology can be so effective and could so easily lead to the radicalising of a whole new group of hitherto unaligned groups of people, which will result in turn, in a fracturing of civil society unimagined in our time.

When politicians resort to tooling up the police, they do so for a very good purpose, and they intend the weapons to be used. We are fast approaching that time.

Tuesday, November 08, 2011

Banking culture saps energy and enthusiasm!

A fascinating story in today's Daily Telegraph. Told by a former insider at Lloyds Banking Group, he unloads a broadside at his former employers.

'...If some mad professor wanted to conduct a cruel experiment in the psychology of stress, he couldn't do better than to replicate the corporate culture of Lloyds Banking Group...'

He then proceeds to describe what can only be defined as a completely dysfunctional environment, where very senior people are expected to put in punishing hours of work '...to micro-manage the smallest details of everyday business...'

Probably no bad thing if some mega M&A deal is about to be signed off, but to receive an text at 1.00am demanding details of a seating plan or a briefing on a customer recently met, demands an urgent review of the mental balance of the sender!

He talks about an '...endless cycle of reorganisation...' a seemingly permanently repeated activity since the merger with HBOS in 2009, during which, each member of staff has to re-apply for their jobs, and which demands many months of management time. During this time, all effective decision-making had to be put on hold, leading to a state of inaction '...close to paralysis...'

Managers' decision-making authority was eroded to the point that in order to get approval for two additional junior staff required to help undertake a vital compliance task (probably something like a major KYC remedial exercise), it required a study by external consultants, costing far more than the modest salaries of the staff needed, and adding months of delay!

Deferring decision-making became the order of the day, and instead of exercising authority, managers chose to get 'sign off' from as many other people as possible. This, we are told, led to an atmosphere of distrust and suspicion, which the write finally ended by resigning!

As an ordinary man in the street, I used to find myself caught in a quandary when I was forced to determine what sort of service the public are entitled to look for from the major High Street banks. We have been constantly told that the banks have to be free to pay salaries and bonuses which make their ordinary client's eyes water, because the banking process is so complex and they need to be able to hire the best brains, to remain competitive.

I no longer believe this bullshit, indeed, I haven't believed it for many years. When I was in the Fraud Squad, I often had to go to banks to elicit information, get evidence we needed to convict some scam artist, and I never once ceased to be amazed at their apparent lack of common sense, their constant obstruction of every move we needed to make, until they were in possession of a piece of meaningless paper called a 'Bankers Books Evidence Act Order'. Even then they would only eke out the information like it was their own blood.

Later, I watched while financial practices which would shame some three-card trickster became the sine qua non of day to day business practice, while young people, frightened for their jobs, aggressively pushed the sale of new credit cards, new accounts, personal pensions, personal protection insurance policies, whatever was flavour of the month being promoted by their greedy sales managers. No wonder they were allowed to get away with it, there was no-one left with any vestige of business morality left to put the brakes on, and all the time, the level of operational dysfunctionality was getting worse and worse.

If you are one of those who is so fed up with the level of non-service you get from your bank, the lack of management empowerment, the inability to take even the most simple decision, then read this article on page B4 of the Daily Telegraph. I doubt whether Lloyds is alone in this condition, banks are so used to benchmarking themselves and their business methods by what their competitors are doing, that my guess is they are all in the same condition of paralysed inertia, as the author of the article puts it;

'...Middle managers' inability or reluctance to make decisions puts a further burden on senior executives, who are already prone to meddle too much in detail...'

God help us if they had to do something complicated.........