Saturday, May 23, 2015

Final real proof that the global banking industry is an organised criminal enterprise.

Those of you who have read my blogs will know that I spare no niceties when it comes to describing and defining the global banking industry.

For those of you who are new to my observations, I reiterate my firmly-held belief that by far the majority of those who work in the major global banks have become corrupted by their remuneration, and their immunity from accountability, and have become little more than unrepentant organised financial criminals.

I am on record in many places saying that I do not believe that these institutions could return the level of revenues and achieve the targets they are set, without committing wholesale criminal offences, of theft, fraud, false accounting, forgery, insider dealing and wholesale market manipulation.

I have been roundly condemned by the institutions themselves who dislike the fact that a former Fraud Squad detective like myself will so openly denounce them for being the criminal mafias that they are.

I do so because these institutions appear to make no effort to put their houses in order, despite repeated fines for criminal misbehaviour. The latest fines imposed on the industry just join a long queue of other fines imposed for previous criminality. Despite all the evidence, as yet, no-one has been sent to prison for any of these criminal forays, and despite the fact that the institutions rarely put up any meaningful contest when charged with these scandalous affairs.

It is almost as if the entire regulatory and political galere has simply come to accept as a matter of course, that the financial services industry is staffed by a bunch of morally dysfunctional criminals who appear to think nothing of flouting the criminal law on a wholesale basis.

But what can it possibly take for these Mafiosi to be brought to heel, when the regulatory agencies, the SFO and the Police Intelligence Agency do absolutely nothing to confront them?

Only this week, yet another major scandal has broken involving the usual list of criminal suspects.

Barclays Bank has been fined £1.5 billion by UK and US regulators over foreign exchange (forex) failings. 

The £1.5 billion fine includes a £284 million fine by the Financial Conduct Authority (FCA), which is the largest financial penalty ever imposed by the FCA, or its predecessor the Financial Services Authority (FSA). 

US regulator the Commodities Futures Trading Commission has fined Barclays $400 million (£257 million), the New York State Department of Financial Services $485 million (£311 million) and the U.S. Department of Justice (DOJ) $710 million (£456 million).   

Barclays is one of five institutions including Royal Bank of Scotland, JPMorgan Chase , UBS and Citigroup that have been fined a total of almost £4 billion over the manipulation of foreign exchange rates.

The FCA said that Barclays’ failure to adequately to control its forex business was particularly serious in light of its potential impact on the systemically important spot forex market. 

Georgina Philippou, FCA acting director of enforcement and market oversight, said: 'This is another example of a firm allowing unacceptable practices to flourish on the trading floor. Instead of addressing the obvious risks associated with its business Barclays allowed a culture to develop which put the firm’s interests ahead of those of its clients and which undermined the reputation and integrity of the UK financial system.'

If Ms Philippou is not careful when it comes to describing the wholesale horror stories perpetrated by the banks, she will attract the same reputation for blurbspeak, as that which defined her predecessor in title, Tracy McDermott.

The FCA found that between 1 January 2008 and 15 October 2013, Barclays’ systems and controls over its forex business were inadequate.

It said these failings gave traders the opportunity to engage in behaviours that put Barclays’ interests ahead of those of its clients, other market participants and the wider UK financial system. 

These behaviours included inappropriately sharing information about clients’ activities and attempting to manipulate spot forex currency rates, said the FCA.  

So, possessing this damning knowledge, why has the FCA reverted to its traditional discredited methods of issuing fines. It doesn’t matter how much you fine these institutions, because it doesn’t come out of the pockets of the directors or responsible people. It is paid for by Shareholders yet again, while the directors and the board continue to pick up their bonuses and salary packages.

The FCA said that Barclays was among other banks already participating in an industry-wide remediation programme, which included senior management at Barclays taking responsibility for delivering the necessary changes.

Barclays chief executive Antony Jenkins said the misconduct at the core of the failings is ‘wholly incompatible with Barclays' purpose and values and we deeply regret that it occurred. ‘

He added that dealing with these issues and appropriate disciplinary action was a ‘key priority’ in its plan to transform Barclays.

Jenkins said: ‘This demonstrates again the importance of our continuing work to build a values-based culture and strengthen our control environment. We remain completely committed to that effort. I share the frustration of shareholders and colleagues that some individuals have once more brought our company and industry into disrepute.’

In November 2014 the FCA, alongside US and Swiss regulators, fined five banks – Citibank, HSBC, JP Morgan Chase and UBS – a combined £2.1 billion over forex failings.

The fines related to the five banks' G10 currencies spot forex trading operations.

In April, Barclays set aside an additional £800 million for provisions for its involvement in the forex scandal, bringing its total provisions over the rate-rigging probe to £2 billion.

These are facts and they arise out of pleas of gulty to the commission of criminal offences, so why are none of these guilty men facing lengthy gaol sentences?

Well, now we may have the evidence we have long needed to demonstrate the true level of criminal corruption which has gripped the financial industry. This proves, once and for all, that these egregious crimes are not simply committed by a few rogue traders, which is, of course, what the directors would have us believe, but proves that wrongdoing and criminality is inherent throughout the entire business model.

Quoting from a damning report by a US law firm Labaton Sucharow LLP on the findings of a survey of financial services professionals, reveals widespread disregard for ethics, and an alarming use of secrecy policies to silence employees 

So whatever the bank CEOs may want to tell us about ‘...building a values-based culture and strengthening our control environment...’ any efforts to reform Wall Street and The City of London may be faltering dangerously.

The survey, the most expansive of its kind, polled more than 1,200 U.S. and UK-based financial services professionals to examine views on workplace ethics, the nexus between principles and profits, the state of industry leadership and confidence in financial regulators. With findings pointing to a continued disregard for ethical engagement and alarming new tactics to silence potential whistleblowers, the industry appears to be faltering in its reform efforts.

In one of the most concerning findings, 47 percent of total respondents feel it is likely that their competitors have engaged in illegal or unethical behaviour to gain an edge. While nearly one in five professionals feels it is at least sometimes necessary for financial services professionals to engage in illegal or unethical activity in order to succeed, a full 32 percent feel compensation structures or bonus plans pressure employees to compromise ethical standards or violate the law. Of those surveyed, 27 percent don't agree that the industry puts the interests of clients first.

How severe is the ethical breakdown? An astonishing 22 percent of respondents say they have observed or have first-hand knowledge of actual wrongdoing in the workplace. On an individual level, a quarter of those surveyed say they would likely engage in insider trading to make $10 million if there was no chance of being arrested. Employees with less than 10 years of experience are more than two times as likely to use non public information than those with over 20 years of experience, reporting 32 percent and 14 percent respectively.

"Most disappointing is the lack of change in many of the results when compared to surveys from previous years. Despite significant energy and efforts, it appears we need to continue to think about how to improve the culture of ethics in the financial services industry and most likely, in other sectors as well," said co-author Ann Tenbrunsel, Ph.D.

Perhaps the most disturbing findings relate to efforts to stifle reports of misconduct. Despite the unwaivable right and indeed, legal duty to report potential wrongdoing to law enforcement, and the federal government's public effort to identify and punish organizations that illegally attempt to silence employees, a shocking 16 percent of those polled say their company's confidentiality policies and procedures prohibit reporting potential illegal or unethical activities directly to law enforcement.

One out of every 10 respondents report they have signed or have been asked to sign a confidentiality agreement that specifically prohibits reporting potential illegal or unethical activities directly to law enforcement. For those who make over $500,000 annually, that number rises to 25 percent. Of the total sample, 19 percent feel it is likely that their employer would retaliate against them for reporting wrongdoing.

"When corporate whistleblowers are prohibited, discouraged or retaliated against for reporting crime to cops, we should all be scared—very scared," said Jordan A. Thomas, Chair of the Whistleblower Representation Practice at Labaton Sucharow and co-author of the report. "The widespread, systematic and previously unknown scope of gag orders in Corporate America is a wake-up call for the SEC and other law enforcement authorities. These tactics are particularly insidious because they keep local, state and federal law enforcement organizations in the dark about all types of wrongdoing—everything from large-scale corporate frauds, environmental accidents and public safety concerns." 

According to both U.S. and UK survey respondents, financial regulators and law enforcement authorities play a critical role in detecting and deterring corruption.

These are highly disturbing statistics and clearly demonstrate that the financial industry is riddled with criminal behaviour, behaviour which is recognised by management and not only tacitly condoned, but positively approved of by the use of gagging clauses, effectively preventing employees from speaking out.

This report must now be read by the entire Investigations Division of the FCA and its contents discussed and its findings analysed. These figures are reflective of the UK banking industry as well and demonstrate a very high level of criminal misconduct. This information must be assimilated into professional knowledge by the FCA and its enforcement staff and used to define and drive its investigative decisions.

There is no longer any room for complacency on the part of the FCA and those persons wh have played such a leading part in facilitating the criminal wrong-doing which has resulted in such huge fines, must be identified and prosecuted.

The Barclays CEO has made great play of the bank’s new ethical policies and its programmes to teach ethics and business transparency. In the light of findings such as these it is highly unlikely they will be successful.

When I tried to bring the evidence of Organised Criminality in banking to the attention of the Parliamentary Commission on Banking Standards, my evidence was withheld and suppressed and never published, because it was said ‘the banks wouldn’t like it’. Now we are in possession of facts such as these, I should be interested to hear what the Banking Commission has to say about banking standards today!

I won’t be holding my breath waiting!

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.