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Nick Bamford: When scam prevention goes too far

Providers need to start trusting their intermediaries the same way that clients trust us.

It is awful that some people are still being scammed out of their hard earned pension pots, despite all the warnings. Individuals and institutions can only continue to highlight the problem and adjust their systems and processes to protect the vulnerable.

Advisers also need to be careful when arranging withdrawals for their clients. It is all too easy for someone to have their email account hijacked.

We decided some time ago that, if a client emailed us to request a withdrawal, we would not process it until we had spoken to that client. When we do so, we can usually recognise their voices but we also use the tactic of asking questions we know only the client can answer.

“How was your trip to Yellowstone? What birds did you see? How is your daughter’s university course going?” The kind of questions that will get them talking and prove that we are speaking to the right person. The personal relationship the adviser has with their client is a great tool in protecting against fraud and scams.

Battling scams: What role should advisers play?

That said, some organisations are taking things a bit too far. Take the exchange between one provider and one of my administration colleagues last week. She had applied for a withdrawal online for the client in question.

The provider asked her: “Have you received verbal confirmation from the client that they want a withdrawal?” My colleague explained that our financial planner had carried out a review meeting with the client at which the subject had been discussed. She had then written a recommendation letter and sent the client the forms to sign. The client returned the form duly signed and completed. The planner had also obtained a copy bank statement from the client; a regular part of the process for withdrawals these days.

Was that good enough? Apparently not. The provider explained how the client could have had her post hijacked after the meeting, with a scammer intercepting the documentation.

They wanted yet another call to check the client had indeed signed and returned the forms.

Scams could be behind 1 in 12 pension transfers

At what point do you stop? If we were to make that further call, would it then require something else afterwards? At what point do clients start to get fed up with multiple contacts for what should be a simple transaction?

I do not in anyway want to downplay the need for security but the particular institution in question is the same one whose system randomly changes the client’s date of birth when you apply for a plan online. It is aware of the problem, apparently.

Institutions need to start trusting their intermediaries the same way that clients trust us. By all means have security checks and be diligent. But if it is going to reach the point where a meeting with the client, a letter of confirmation and a completed application form supported by a copy bank statement is not sufficient, then I suspect it is just going to get harder for everyone.

I sent the provider an email on the subject and apparently messages by carrier pigeon, smoke signals, Morse code and those flags Nelson used at Trafalgar are all unacceptable. Pity really.

Nick Bamford is executive director at Informed Choice

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. As ever, Nick is on the money. The bureaucrats appear to be winning. Main problem seems to be interpretation of checks and balances.

  2. Had similar issues with DB Scheme administrator. OTT. Yes I know they have 6 months to transfer but that does not mean that you have to take that long.
    There are too many people who spend too much time looking for problems and coming up with excessive and restrictive rules.

  3. I whole heartily agree, however, we live in a world where mistakes can “not” be made, some-one always “has” to be accountable and some-one has to “pay” the price, the island we live and work on, is no different, some may say a tad more bureaucratic… maybe ?

    Is it time for financial services workers to wear mandatory high viz jackets and hard hats, trained in waterboard tactics to aid us in obtaining every shred of information from said caller and make us identifiable to the passer by, this person can seriously damage your wealth ?

    We have come a long way from conducting things on the back of a fag packet…… but have things really changed ?… I am not convinced… in some ways I think its actually easier now to commit fraud and steal now….

    Entering from side of stage…… the CMC’s to clean up….

  4. Why not let the client contact the provider/platform and arrange their own withdrawal. After all most use these freedoms as an ATM.

    Personally I can’t see where being overcautious in this case is a bad thing.

  5. Ps Alternatively why not get the client to put the request in writing for the adviser to forward. (A form!) Surely the client is able to wait a week.

    • But Harry how can you be sure the letter is from the client? That the said bank account is that of the client. That the client hasn’t had a gun held to their head to force withdrawal. All these are “serious concerns” of providers. The fact that we have met or talked with the client is not sufficient. The fact that it is the client’s money is a factor that many seem to forget.

    • Harry

      Thats exactly what they did. Client did sign and return the form to instruct the withdrawal. It had nothing to do with time sensitivity and everything to do with how many times do we need to check? Client meeting, advice confirmation, completed request form, and client bank statement.

      We need to protect clients from scammers but it is their money remember

      Nick

      I’m in favour of client protection but my point is how many times do we have to check this?

  6. Perhaps the real crux of the matter is what happens when a scam succeeds? And they do, probably more often than the average adviser thinks they do – most will see one or none. Platforms see them all and view the problem as a group not about an individual client.

    Perhaps advisers might think a little differently if they were always liable rather than the platform?

    • We would take the liability on if through fault of our own a client was scammed. That’s why we always follow the steps I have outlined such as never just accept an email instruction but speak to the client.

      Nick

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