Beverley Building Society - Mother lost £30k to APP Fraud making a CHAPS transfer to an account she thought was her sons

[FloJoe]

Hi

Seeing if someone can give advice as to whether its viable to take the nations leading building society to the small claims court to get a judgement, for what is in essence failing to adhere to regulations.

June 2018 - My mother lost £30k to APP Fraud when making a CHAPS transfer to an account she thought was her sons.

August 2018 - An advisor wrote to her building society on my mothers, and he asked the following question -

"I would expect your staff to be well aware of the risks of doing high value CHAPS payments, so why did they not warn her that despite asking for her son's name and full address, neither of these pieces of information would be validated through the payment process".

September 2018 - Building society responded stating -

It is not part of the process our branch staff follow to discuss the CHAPS process in this level of detail.

we took this statement from as being truthful and not misleading.

However several months later i came across the CHAPS Reference Manual, which are the rules for using the CHAPS payment system.

https://www.bankofengland.co.uk/-/media/boe/files/payments/chaps/chaps-reference-manual.pdf

5. A Participant (as a sending Participant) shall ensure that its contract with a Customer who wishes to make payments through CHAPS using the sending Participant's payment services provides (in easily understandable language and in a clear and comprehensible form):

5.1 an explanation of the unique identifier that must be provided by the Customer in order for a payment to be properly executed through the CHAPS System;

5.2 that the sending Participant will make a payment solely on the basis of a unique identifier and will not execute it on the basis of the intended recipient's name;

Quite simply when making CHAPS payments, banks and building societies have to tell their customers in clear and understandable English that the "recipients name" is not used in the transaction, and the only identifiers that matter are the sort code and account number.

As is shown above the building society told us that their branch staff, do not have to go into such levels of detail explaining this to their customers.

quite clearly they misled us.

In my view this is in breach of the "Principles of Banking". PRIN 2.1
 

6 Customers' interests

A firm must pay due regard to the interests of its customers and treat them fairly

 

7 Communications with clients

A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

 

https://www.handbook.fca.org.uk/handbook/PRIN/2/1.html?date=2016-10-03

we would be looking to take this building society to the small claims court on the grounds that they "misled" us.

 

Obviously if they had told the truth at this time they would have been liable to refund the money, or failing that if they had admitted to failing to adhere to this regulation, as they should have done ... then we would have instantly taken them to the FOS.

If you'd like to give views as to whether using COBS/BCOBS is a viable route to get a "judgement" on this matter, it'd be appreciated.

Part 2 of this issue.

When I became aware of the CHAPS rules and pushed the Building Society for an answer.

On 22/5/2019 they responded claiming to be adhering to this regulatory obligation as their terms & conditions state –

this is their response.-

 Contractual Terms and Conditions

46. When making payments, the following information is required from you about the company or person you are paying:

 a.      For CHAPS payments, the bank’s name and address, sort code, account number and, if applicable, reference. 

From this, you can see that the Society did provide an explanation of the unique identifiers needed to make the CHAPS payment, as required by section 5.1 of the Manual, and in compliance with section 5.2 did not identify the recipient’s name as a requirement for that purpose.

 This contradicts their previous response in September 2018, where they claimed they did not need to go into such detail. 

Furthermore, their response is absurd. They are claiming to be in compliance by “not” stating in their Terms & Conditions that the payment will “not” be executed on the intended recipient’s name.

When to comply with the CHAPS Manual they must state “in easily understandable language and in a clear and comprehensible form that the payment will not be executed on the basis of the intended recipient's name. 

I realise the their response looks as if it’s taken from the Novel Catch 22, but this is what they are claiming.

Their position is truly preposterous.

In this response in May 2019 the building society  issued referral rights giving us 6 months to take this matter to the FOS.

 i did, however after my complaint had gone into them, they claimed these referral rights were sent by error.

And quite remarkably the FOS agreed with them, and the case could not be heard despite DISP 2.8.2AR stating the following

DISP 2.8.2AR If a respondent consents to the Ombudsman considering a complaint in accordance with DISP 2.8.2 R (5), the respondent may not withdraw consent.

After the FOS threw the case out i contacted the person at the FCA (now left) who created DISP 2.8.2AR, and he told me that he believes the FOS have made an error!

Hence why i seek a judgement on what is shown in my 1st post, as if they did not mislead us we'd have gone straight to the FOS.

[BankFodder]

Sorry to have taken so long to give you a response.
One of the problems about this is that you are dealing with a very substantial amount of money and that it takes you well over the small claims limit and that means that if you happen to lose the case, you will be exposed to very substantial costs of the bank. You can be absolutely certain that the bank will spare no expense to intimidate you with the fear of expenses and eventually to crush you.

I understand that you have already been to the ombudsman. Please could you put up a copy of the decision in PDF format

[FloJoe]

But i never said im looking to take them to the small claims court for £30,000, as obviously it is well above the £10,000 threshold. 

 

I am merely looking to take them to the small claims for £100 to get a judgement on whether they breached PRIN 2.1 by lying to us, in their September 2018 reply.

 

At which point i should be able to get it reported in the national press that they breached the multiple regulations i highlight.

 

There is no point putting the FOS judgement on here, that route is closed for now and is not relevant. It quite simply says they sent the 2nd referral rights by error.

 

Quite simply if i can get a judgement which involves showing this building society breached the CHAPS regulation that i highlight .... then it opens the door to everyone who has lost money to APP Fraud when making payments via CHAPS getting their money back.

 

Obviously CHAPS is used for large payments so vast numbers of people will have lost life changing sums of money.

 

I should add that a building society i use has changed their CHAPS transfer forms when i pointed it out they were not adhering to these CHAPS rules, thus by default accepting they were not adhering to it.

Beverley_Building_Society.pdf

Edited July 15, 2021 by FloJoe

[dx100uk]

a mere county court win does not set a precedence

[FloJoe]

Its not really what i asked though is it.

 

As the people on here are seemingly incapable of Answering..could my postings please be deleted.

[BankFodder]

I'm afraid we don't although if you think there is anything here which identifies you then we are happy to edit that.

If you would like your account deleted then we can do that – no problem.

In terms of setting a precedent, it's absolutely correct, of course that a County Court judgement wouldn't set any precedent but I do agree with you that it would be very significant if the court held that the bank had acted unfairly to you.
In terms of being something that the press would be interested in – I think it's extremely unlikely. However, getting a BCOBS judgement against the bank that they had acted unfairly I think would open the way to bring an action for breach of contract – although that would be for the entire £30,000.

If there was a BCOBS judgement against the bank then I think it's highly likely that they would sit down with you and probably organise the settlement in confidence – probably as a "gesture of goodwill".

How do you want to play it? Do you want your account deleted?

[FloJoe]

Thanks, thats the kind of answer i was hoping for! You have read my train of thought, as to why i merely seek a judgement on these regulations for now.

I am frequently in touch with a person who the national newspapers go to for comment and advice in relation to APP fraud, he is extremely interested in hearing an outcome of this CHAPS rule for his other clients, who have lost money this way .... and for the bigger picture of reimbursement for people that have lost money to this type of Fraud.

Hence getting such a judgement into the national press shouldn't be a problem. 

I have contacted the FCA, BoE, PSR for an answer as to who regulates "indirect participants" of CHAPS.  The BoE and PSR have both said it is for the FCA to regulate them ... but the FCA have said the BoE has to regulate them. So in essence no one regulates CHAPS at this moment in time!

I have put a complaint about this to the FRCC, who have come back with their interim report, with the full report due to be issued shortly, though i have little faith in their ability to confirm who is the regulator for "indirect participants" of CHAPS.

I am trying to speak to a friend of a friend who is financial solicitor, but would you know of any competent solicitor or barrister who has expertise in the small claims court, and using BCOBS that would be interested in such a case.

 

[BankFodder]

First of all we would make recommendations as to legal professionals. This site is all about self empowerment and we would support you doing it yourself. If you wanted to take professional advice from elsewhere then please do go ahead but we won't presume then to give any kind of parallel advice. Of course we would be interested to know your progress because what you succeed – or don't succeed in doing – will be very helpful for other people who visit the site.

If you wanted to start this action yourself then we'd be happy to help. You can be certain that the building society will rise up against you and go to wildly disproportionate effort and expenses to crush you.
On the other hand of course they might suddenly reach out to you for a confidential settlement – and if they did I would hope that you would be prepared to let us know by email in confidence what has happened.

If you are familiar with BCOBS then I would say that the process is the same as any other small claim. I would start off with a very short form particulars of claim and give as little information as possible and see what it drew out. We tend to find here that brevity is the best policy because of very detailed particulars of claim gives the other side lots of hints about what to do.

We are currently helping somebody assisting somebody in a BCOBS case against Santander.

As it happened, the person we are helping went ahead and started the claim of their own bat.

Although this became rather a nuisance, one positive spin was that his particulars of claim was quite lamentable but it did prompt Santander to produce a fairly detailed defence.

The court then threatened to strike out the claimant's case unless he filed a properly particularised claim within 14 days. We have been helping him do this but now we have had the benefit of seeing the Santander defence which has been pretty detailed and has given us lots of clues as to their position.

We would always suggest minimal particulars of claim rather than providing points that the defendant can latch onto – and then seeing what kind of response it produces.

Of course a professional lawyer couldn't get away with this but as a litigant in person you have a great deal of licence and it needs to be exploited.

[FloJoe]

Thanks, the one issue with being a litigant in person, is it will be in my 73 year old mothers name, thus the added stress for her, as she couldn't speak in court it'd destroy her. 

 

I am aware in rare cases and where the applicant has been excessively unreasonable they can get charged with the defendants legal costs, i presume so long as all court orders are followed it is bordering on the impossible for this to happen.

 

Im just back from a 6 hour drive, so need to relax, then go over things with my brother as to the best next steps.

 

 

[BankFodder]

That's fine. We are happy to help you and support you as well as we can.

One word though – if you don't get the answers you want or when you want, no need to start throwing toys out of prams, I think.

[FloJoe]

Apologies; a 530am start, then a long drive, followed by getting a puncture 10 minutes from my home is my excuse!

..... and having to read more from the FCA, in relation online banks flouting the 2007 Money Laundering Regulations, by not doing "enhanced due diligence" of fraudsters opening accounts remotely .... and also why they are allowing banks to ignore the part about doing "enhanced monitoring" of the account.

https://www.legislation.gov.uk/uksi/2007/2157/regulation/14/made

£30,000 went into a new account, and then £30,000 left the account out in 3 batches of £10k to 3 accounts around Europe in a mere 5 minutes ... i believe these were the first transactions of the account, and this is meant to be "enhanced account monitoring".

This is the FCA's response -

You raise a concern about Fidor Bank not undertaking enhanced customer due diligence and monitoring as required under Money Laundering Regulations 2007 (MLR). To illustrate your concern you note that Fidor Bank advertised that they did not undertake credit checks at account opening. 

Enhanced Due Diligence under The Money Laundering Regulations 2007 

You are correct that the MLR require firms to undertake customer due diligence and enhanced due diligence where appropriate. The regulations do not specify what means should be used to undertake identification and due diligence. Nor do they set out or list what information sources can be used to satisfy the requirements.

The regulations state that customer due diligence must be carried out on the basis of information obtained from a reliable source that is independent of the customer. This leaves it to firms to satisfy identity and due diligence requirements by using appropriate independent data sources.

For example, there is no specific requirement for firms to undertake credit checks under the MLR, rather a credit check is one of many methods a firm can use to carry out due diligence. However, firms should be able to demonstrate to regulators that they have appropriate policies and procedures in place. 

 Further guidance on the requirements is provided by The Joint Money Laundering Steering Group (JMLSG). The JMLSG is an industry body that provides guidance on the expectations on firms in complying with their AML and financial crime obligations.

Again, the JMLSG does not advocate particular requirements but emphasises the importance of firms taking a risk based approach. The JMLSG does highlight best practice and points firms in the direction of other AML and financial crime resources that can assist them in formulating their approach. 

 This flexibility in the regulations is deliberate. It allows firms with different business models and capabilities to meet their obligations through a risk based assessment of their customers and business. It also reflects the wide and varied independent information sources available to firms.

 This approach was taken to accommodate the rapid changes in the financial services sector following the financial crash of 2007-2008 and the development of the fintech sector in the UK.

 Fidor Bank

   As we have stated previously, much of the work the Financial Conduct Authority (FCA) does with firms is covered by legal and policy restrictions. 

This means we are unable to provide specific detail on the firm and any supervisory actions that may have taken place. I do understand that this can be frustrating for those who have been impacted by the actions of firms. 

[cjcregg]

Personally I think you're wasting your time. It's rare for the small claims court to provide written judgments. In any event what you're seeking isn't the function of the small claims court and I doubt they would consider it.

[FloJoe]

Ive lots of time on my hands, and i've already spent lots of time doing all the research.

 

You can get the judgement in writing when requesting court transcripts, though i do get what you're saying.

 

The function of the small claims court is in essence for when agreements cant be reached between parties and to make a judgement where one seeks a reward from the other ... thats all i'm looking to do.

Though for a decision to be made, the regulations i highlight will have to be scrutinised.

 

 

[FloJoe]

Still going down other avenues to get this matter resolved, for obvious reasons only want to use court as a last resort.

In May 2019, NW issued consent to take them to the FOS, only to withdraw this consent in early 2020 and after the complaint had gone in.

I have looked at historic cases on the FOS’s website, and used the search term “2.8.2AR” which came up with 107 cases.
https://www.financial-ombudsman.org.uk/decisions-case-studies

However of these 107 cases, there are only five where DISP 2.8.2AR is mentioned, and where firms try to claim referral rights were sent “by error”, as NW did in my mothers case.

On every single occasion, the FOS does not allow the firm to withdraw consent after they have provided it. Note that Halifax used the exact same excuse as NW in that they claimed to have sent referral right “by error”, and the Ombudsman would not entertain them.

Either these 5 cases are all wrong, or the decision in my mother’s case was wrong.

But please look at the FOS’s response to the Halifax, and their attempt to claim referral rights were “sent by error”.

2021-08-27 - FOS AND DISP 2.8.2AR.pdf