Hardly a day goes by without a new scam warning. Scammers are everywhere, actively looking for opportunities to steal people’s money. They are fearless and, given the chances of being caught and punished are minuscule, it’s no surprise that it’s a growing industry.
I spend about half of my life looking at, and trying to prevent, scams in the pensions arena with some moderate success through the hard work of my PSIG colleagues. Through our Codes and related work, we estimate we’ve helped stop around £250m of pension savings falling into scammers’ hands, but it’s not easy. I speak at many events, private and public, warning of the dangers of scams and how to prevent them, but there’s always more to do.
Despite years of campaigning, I am still shocked and dismayed by the lack of meaningful action on scammers and by the relentless pursuit of victims by secondary scammers, and perhaps most shockingly, by HMRC. What upsets me most is the effort put into punishing those who have already lost their savings, as well as their self-respect.
The same energy HMRC puts into pursuing victims should instead go into stopping the scammers, but scammers are almost too big to stop – we seem to just shift scarce resources from one scam area to another, with the result that not enough central manpower is available to do anything other than scratch the surface. It is just not good enough to say we can’t focus on pension scams because romance scams (say) are the big thing for now. We need much more intelligence and enforcement resources.
Pension scams are not unique. I have recently joined forces on an investment fraud All Party Parliamentary Group, working with victims of other types of financial fraud and can see the same patterns, the same dismissal of victims and the same failure to go after the criminals.
All financial scammers are the same. They see a weakness or a need and they exploit it, usually posing as professional advisers or advertising online. It takes a strong person to resist a very convincing spiel – the fact is more than half of us could easily fall for a well positioned scam. The proportion increases when we are desperate or otherwise vulnerable. The easy thing to do is blame the victim for being foolish or even complicit. In financial scams, making a mistake can often result in tax charges or penalties. Legally, tax is due but taxing the victim while the scammer walks away with everything is cruel and unfit for a modern society. This needs to change and any tax charges or penalties deemed due should be levied against the scammers. Treasury would get what it is due, but not from the victims of a scam. But how would HMRC get hold of scammers assets? Easier than you think. NCA, for example, already has the power to pursue scammers and seize assets on the basis of suspicion of fraud, yet it doesn’t.
By looking beyond pensions and the UK to experiences elsewhere in other industries and countries, we can learn a lot. For example, banks take financial fraud very seriously. They invest heavily in prevention, work with social media platforms to take down scam sites and expect regulators and police to prosecute. Why do they do this? Largely because they have skin in the game. If someone takes money from your bank account under false pretences, unless you’ve been wilfully negligent, the bank will make good your loss. They are required to do this by their regulators, so it in their interests to stop scams. They also have a direct mission to prevent money laundering and financial crime. They’ve got each other’s backs too with very sophisticated “jungle drums” – they collect and share intelligence on scammers and fraudsters. They educate customers about the dangers and the signs of scams and (while mildly annoying), keep asking if we are sure about a transaction before we press the button to make an online payment. Banks also have some big guns, like Treasury, behind them.
Tax charges for being defrauded are not acceptable and the UK is becoming an outlier in its adversarial approach. In Canada, for example, victims of financial fraud are able to offset those losses against income or capital gains tax. This is because the state recognises that victims are not the problem. In the US the IRS pursues fraudsters vigorously with a 90% conviction rate. In the UK we pursue very few: fraudsters have a 1 in 3,000 chance of being convicted.
Why is this not the same in pensions? One significant difference is that for many providers there is no direct relationship with the end customer. We work for trustees or schemes or employers, not for the individual member. We can’t tell members what to do – we have to engage in a ritual dance to help ensure members understand very complex choices, but we do it because we care. Prevention is better than cure, for now, so we continue to check for scam signs, hope we get it right and hope for a change in government attitude to victims and scammers.
Margaret Snowdon, Chair of PSIG
