Since the 2008 financial crisis, the UK authorities have been absolutely toothless when it comes to prosecuting bankers who’ve broken the law.
But is this just incompetence? Or is our regulatory system designed in a way that means that victims fall through the gaps, while banks are permitted to operate above the law.
Joining us on the episode this week is former Met Detective who fell victim to the Royal Bank of Scotland’s long-running scheme to defraud its small-business customers, Andy Keats, and researcher & campaigner, Joel Benjamin.
You don’t have to travel too far from Britain to find a government and regulator that took decisive action when fraudulent bankers were caught manipulating markets or fleecing their own clients.
Iceland stands alone when it comes to jailing its crooked bankers. Around 30 people were jailed over the 2008 crash, at least five of them senior bankers.
Iceland has a population of about 350,000. In the UK we have over a million people working in financial services. Only around seven people were jailed over that period. None of them senior bankers.
“When you look at the collapse of RBS, the collapse of HBOS, Northern Rock, to what extent were senior managers culpable – Fred Goodwin, Ross McEwen etc – in these events?,” researcher & campaigner, Joel Benjamin told Renegade Inc.
“It seems we as a nation completely lack the political will to tackle white collar crime. In the city of London, our regulators, our police forces, seem completely not up to the task when it comes to tackling these events.”
It is only now that victims of bank fraud and other white-collar crimes are working together with former Met Detective, Andy Keats – a victim of fraud himself – digging through the entrails of particular cases, doing the work which the police force itself should be doing, that we seem to be getting somewhere in terms of understanding what has happened and how the system is failing people.
After retiring from the police force, Andy Keats launched a company that developed identification systems for cats and dogs. It was a “high net-profit” business that had a turnover of around £1 million a year.
Keats made a complaint against a credit team manager at the Royal Bank of Scotland’s payment processing company, ‘Worldpay’, and was later told by a senior manager at NatWest that his account was put on the ‘to-get list’.
“We were put on the board as terminal, that we were going to be terminated,” he told Renegade Inc.
Four years after his company stopped trading, the former detective discovered that the manager against whom the complaint had been made, along with a ‘sidekick’, had been making false claims about the status of the company and the risk it posed to the bank.
“We told them that we were moving to Barclays because it had granted us a loan to expand our business,” said Keats.
“We were not illiquid, but we did get terminated.”
Twelve days before receiving RBS’ notice of termination, Keats received an offer for £2.5 million from Graham Dacre CBE, after four months of due diligence, to buy the business and keep he and his co-founders on as directors, along with his staff, and grow the business together.
Shortly after, RBS changed its terms of business, requiring that all sales made through credit and debit card revenue go through RBS’ Worldpay system, meaning that it could take up to three days for the money to come through.
“They wrote to us and said ‘well, for the next four days you can trade that way, but after four days we’ll be keeping your money for at least 10 years’,” says Keats, who says RBS provided no explanation for changing its terms of service.
“They wouldn’t give us a reason,” he said. “We had a contract that said three days, they breached that.
“From that point on, we had 30 of our staff on the phones, making sales. All the money went into the system and never came back out again.”
Six weeks later, Keats had to give immediate notice to 30 of his staff that they were being made redundant.
“It was the worst moment my life,” he said. “It was horrible. It makes me want to cry now, and I’m not far off it. We had a successful business.
“The staff laughed at me. They thought I called a meeting to give them all a bonus for Christmas. It was only when I started crying, so did they.
“They came, and they hugged me, and we went down the pub. That was the last of my business.”
The day prior, Keats had received an email from RBS via its solicitors at DLA Piper, agreeing that provided he agreed to stop trading the very next day, it would release the money that would have allowed him to pay his staff their wages, but only on the condition that he took no action against the bank.
“We now understand that hundreds – if not thousands – of companies went through the very same things as we did,” he said.
“It was strange because as a former police officer I’m thinking, ‘this crime’ and you’re told by your own solicitors, ‘no, this isn’t crime. This is how it goes. It’s civil.’ But then you think, no. This is blackmail. This is a crime. This is fraud. This is forgery.”
In 2013, Keats met Lawrence Tomlinson, an entrepreneur and former adviser to Liberal Democrat MP, Vince Cable and the Business Department. Tomlinson had written a report about RBS.
The two began comparing notes on RBS and the way it had been treating its Small and Medium Enterprise (SME) customers. Together the pair discovered that the bank’s behaviour was not civil. It was criminal.
“It amounts to things like false transcripts of telephone conversations, of customer files, records of meetings that didn’t take place, telephone calls that didn’t take place,” said Keats. “You’ve even got a stamp that they used to make sure that something is confidential so that if they give it to the Financial Ombudsman, for example, it says ‘don’t give this to the customer’. The reason you don’t give it to the customer is because the document is not identical to the customer’s originals. The customer has a completely different document to the one the bank produces.
“It’s fraud. It’s forgery.”
Researcher and campaigner, Joel Benjamin, told Renegade Inc that part of the problem is that the primary regulator, the Financial Conduct Authority, is not empowered to investigate individual cases.
Take RBS’ Global Restructuring Group (GRG) for example. Though RBS set up the subsidiary to systematically bankrupt thousands of SME customers, earning it £89,000 per minute, each of those frauds is considered an individual case, rather than a pattern of a larger fraud, and therefore the FCA is unable to investigate.
“The regulators sat on the GRG scandal for the best part of a decade without taking any action until they were forced to by Parliament,” says Benjamin.
“The regulator claims it is independent. The question we have as researchers, campaigners and victims is: how does the regulator deal with these individual cases? And how many victims need exist before the FCA is forced to act? One thousand? Two thousand? Three thousand?
“In the case of GRG, there are anywhere between 16,000 and 70,000 victims.
“What is the volume at which the regulator should be forced to act?
“The RBS refuses to answer that question.”
Even with a significant level of media interest and increasing numbers of victims coming forward, often that is even not enough to force action.
In the case of GRG it took a report by Lawrence Tomlinson published in 2013 on RBS for the media and Parliament to take notice. It forced the FCA to set up a relatively one-sided report conducted by law firm Clifford Chance.
“And here we are in 2017, four years later, we still haven’t seen the regulators report,” says Benjamin.
“The regulator has been sending victims to the police. And what are the police doing? They seem to have walked back from taking definitive enforcement action when it comes to financial fraud.”
Nicholas Wilson, a campaigner against HSBC in its illegal charging of customers’ store card accounts, complained to the City of London police several years ago and received a letter in response, explaining that part of the reason it hadn’t taken any enforcement action in his case was that its prospects of success were relatively low. It produced a diagram that effectively said enforcement and police action on the part of the City Police is no longer “the only or preferred option”.
Theresa May introduced new policy in 2014 to set up the College of Policing which effectively walked-back London police from taking any an active role in fraud prosecution.
“They were moving into what they called ‘a partnership approach’, which meant working with the FCA and other agencies like the Serious Fraud Office and the National Crime Agency, but taking a less active role themselves in policing the space,” says Benjamin. “You tend to get a gap between the various regulators, where victims like Andy Keats disappear into, seemingly to never emerge with justice.
“We are told that the crimes committed by RBS GRG is outside their regulatory perimeter.
“There are rules, but the bank has committed a crime outside of the area to which the rules apply.”
Keats says his investigation into RBS has led to an awful-lot of finger-pointing.
“The FCA points at the police and the Information Commissioner’s Office (ICO), and the police point at the ICO and the FCA. You never get anywhere. It’s a circle, a complete circle that nobody seems to have any appetite to break whatsoever.”
The arbitrary limits that the FCA has placed on the investigation into GRG means that victims like Nigel Henderson who has been fighting for justice for 20 years are excluded from the inquiry.
“There is a lot of evidence out there that this fraudulent practice within RBS has been going on for at least a decade prior,” says Benjamin.
“Nigel Henderson isn’t part of the review of RBS GRG and its predecessor, Special Lending Services. They have put these arbitrary limits around the whole investigation, trying to contain it, and to minimise the number of victims.
“For this reason, when you ask the FCA how many victims have come to you from RBS GRG and its predecessor, they will never give you a number, they refuse to make that information public.
“We have been through a couple of rebrands of the FCA now, through three or four Parliaments over that period and nobody has taken action.”
Andy Keats, the former detective and victim of RBS fraud himself says the FCA refuses to acknowledge forged documents as fraud, or even a regulatory breach.
“As an example, if you said that as a regulation you must get customers to sign their loan forms, if you don’t sign it or you don’t get somebody to sign it, the FCA will say, ‘well, that’s a breach of regulations, you can’t do that’, and they’ll be all over them like a ton of bricks,” Keats told Renegade Inc.
“But if the bank says ‘you haven’t got a signature here, never mind, we’ll make one up and forge one’, the FCA will then say, ‘that’s nothing do with us, carry on.’ Because that’s not a fraud.”
Keats told Renegade Inc. that RBS has used fraud to mimic or counterfeit signatures on documents which have been used in court to take businesses down.
“Most certainly it was the case between 2008-2012,” he said. “Nobody believed it then, but now there’s a growing collective of people that are beginning to come around. There are more MPs in the House that are interested in what’s going on.
“They’ve heard the same complaint too many times for it not to be true.
“And we’re in the days now where you can tell the excuses coming from RBS are ridiculous.”
Keats describes RBS as a bank in denial.
“It claims that, ‘well, we might not have treated our customers quite correctly, but you know, we’re okay now’,” he says. “Or, ‘it was a problem with Microsoft Word. It’s Microsoft’s fault, not ours'”.
Keats says he is in possession of a letter from RBS, with Virgin One’s logo on the header, to do with his mortgage. It was related to a NatWest account he purchased from Virgin in 2002.
“So in 2003, all paperwork related to Virgin should have gone,” he said. “But in 2015-16 it arises again when they are trying to defend what they’ve done with with my files by saying that inadvertent capitalisation has occurred when they extracted information from emails of mine and put it into my customer records. It got rid of the first part of the sentence, capitalised the next word, and use the remaining part of the sentence as the sentence, and now they’re blaming Microsoft Office?
“When these things are put into different files, things go missing.
“I have gone through files painstakingly to make sure that they’re absolutely accurate and what I’m saying is correct.”
In 2009, John Hourican, a senior RBS banker gave a speech to bank staff, referencing the existence of 1000 data cleaners, working somewhere in a back-office who are going through documents and making falsifications.
Below is an audio transcript from that meeting obtained by Renegade Inc:
“One thousand of the 10,000 people in the back office do data clean-up and reconciliation,” Hourican is heard saying. “You do not want that on your gravestone – ‘I was a data cleaner’ – it must be one of the most soul destroying things to do for your life. We have to rescue our people from that shit.”
Benjamin says that the question is: what were these individuals doing? And to what extent – as we have documented here – were these document entered into court? Used to bankrupt companies, individuals and partnerships to effectively ruin people’s lives.
Watch the full episode above to find out how to bring RBS and other white-collar criminals to justice.