Financial Services and Markets Bill (Eighth sitting)

Debate between Emma Hardy and Tulip Siddiq

Committee stage
Tuesday 1st November 2022 Public Bill Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

Labour fully supports clause 62, which enhances protection for victims of authorised push payment schemes, but we are deeply disappointed that the Bill does nothing to strengthen fraud prevention.

When asked about fraud in February, the former Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), claimed that fraud and scams are not something that

“people experience in their daily lives”,

which is tone-deaf. Essentially, he dismissed crime as inconsequential. In the real world, countless lives have been destroyed by fraud and scams, and I am sure the Minister will have examples from constituents in his inbox. There is a new Chancellor now, but the lack of ambition in this Bill on fraud shows that the Government’s approach to fraud remains the same. We will debate my new clause 6 on broader strategies for tackling fraud later, but I want to focus on the inadequacies of the provisions in clause 62.

UK Finance has estimated that the amount of money stolen directly from the bank accounts of hard-working families and businesses through fraud and scams has hit a record high of £1.3 billion. That is bad at the best of times, but it is even worse in the midst of a deepening cost of living crisis. That is because the Government have failed to get to grips with new types of fraud, such as identity theft and online scams, which have seen people’s life savings stolen and their economic security put at risk. I ask the Minister to explain why his Government continue to fail to take fraud seriously and continue to push responsibility on to just the banks. For example, the Bill ignores the fact that digitally savvy criminals are increasingly exploiting a range of financial institutions, such as payment system operators, electric money institutions and crypto asset firms, to scam the public.

In its written evidence to the Committee, Santander UK stated:

“Bringing crypto-exchanges into the scope of the Payment Systems Regulator’s powers to mandate reimbursement for APP fraud would be consistent with the principle of ‘same risk, same regulation’ and would introduce important new protections for consumers in area where risk of fraud is significant.”

I ask the Minister to explain why clause 62 completely ignores the emerging fraud and scam risk that EMIs and crypto asset firms pose to the public. What is his response to Santander’s evidence? Barclays similarly asked for clause 62 to be amended to expand the reimbursement protections beyond faster payments scheme payments to cover payments made over other relevant payment schemes or systems. Will the Minister explain why the Bill provides only for the reimbursement of fraud victims who send money using the faster payments system and why other payment systems have not been included in the scope of the Bill?

[Emma Hardy]

In reading the written evidence, there was an interesting cautionary tale from Mobile UK about how the banks introduced two-factor authentication through SMS without speaking to it. It found that fraudsters had worked out that they could get a one-time code by having a duplicate SIM card and intercepting the code sent from the bank, which immediately made me slightly worried about using two-factor authentication text message schemes. Mobile UK was able to find a way around that, but it highlights the need to involve as many stakeholders as possible when looking at fraud.

Mobile UK’s evidence was damning. Its conclusion stated:

“The mobile sector is committed to fighting fraud; the banking sector is clearly also committed, but, from the fraudsters point of view, this is a very low risk crime, as the chances of being pursued are very slim. This has to change.”

I recognise that some of these points are outside the scope of the Bill, as they would involve policing, investment and national crime agencies, but there are lots more things that could be done in the Bill to deal with fraud.

In its written evidence, Barclays said it welcomed that all payments made over FPS are covered by the new protection, but that it

“would note there are other relevant commonly used payment schemes and systems that should benefit from the same protection—for example, the CHAPs payment scheme, and ‘on us’ payments… The Bill should therefore be amended to give the PSR power to require participants in other payment schemes to reimburse scam victims.”

That seems to be incredibly sensible advice from Barclays.

It was echoed in the evidence given by Which?:

“to avoid gaps in protections the PSR should also be required to work with other regulators to introduce reimbursement requirements, including for payments made between accounts held with the same bank or payment provider (which are regulated by the FCA) and for the CHAPs payment system used for high-value transactions”.

That is exactly the same as what Barclays said.

There seems to be a lot of consensus among consumer representative groups such as Which? and in the banking sector about broadening out the provisions, looking at other ways in which fraudsters are working, and dealing with the issues raised by Mobile UK. At the moment, the people who are committing these frauds seem to be getting away with it.

--- Later in debate ---

[Emma Hardy]

As well as my campaign for financial inclusion, I am sure Members will have heard me talk about flooding. I have not tabled an amendment to the clause, but I might be minded to in order to have a further conversation in future.

The clause addresses reinsurance for acts of terrorism. Has the Minister explored looking at reinsurance for acts of flooding? We have the Flood Re scheme, as I am sure he is aware, but that only applied up to 2007 and properties built after that are not included, nor does it apply to businesses. With this welcome move to consider reinsurance for acts of terrorism, has the Minister thought about other aspects, specifically flooding?

[Tulip Siddiq]

We welcome clause 64. I support the principle of the Treasury guaranteeing support for reinsurance in the event of a terrorist attack, but how will the provisions in the clause ensure that the taxpayer is adequately protected from such risks? How will the Treasury hold any public sector body to account regarding the requirements in the clause? Will the Minister provide some detail on the role of the accounting officer, in terms of ensuring that public sector bodies have sufficient oversight of the requirements of the clause?

Financial Services and Markets Bill (Fourth sitting)

Debate between Emma Hardy and Tulip Siddiq

Committee stage
Tuesday 25th October 2022 Public Bill Committees

[Tulip Siddiq]

We support clause 12, which will empower the Treasury to give directions to the Bank where it considers it necessary in the public interest. Does the Minister not agree that such a mechanism is sufficient to direct the Bank of England when the Treasury believes it needs to do so in the public interest? Does he therefore feel that a so-called intervention power is necessary?

In our evidence sessions, which the Minister and other Members were at, we heard very clearly from the deputy governor of the Bank of England and the former chief executive of Barclays that a future intervention power would endanger financial stability and undermine the independence of the Bank of England. There were stark warnings from our witnesses. Does the Minister agree that it would be reckless to ignore that advice from the experts?

[Emma Hardy]

I want to add to the points made by my hon. Friend on our concerns around clause 12 and the independence of the Bank of England, given that the Treasury has such significant powers over it. I refer the Minister back to the evidence given by Sheldon Mills from the FCA. He said:

“I have worked in regimes with public interest tests. I ran the mergers division at the Office of Fair Trading and the Competition and Markets Authority, and my learning from that is that, if put in place, such a test should be used exceptionally and with care, and that there should be specificity about the matters of public interest—in this case, financial services—on which it would be used.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]

That is the FCA asking for specificity—it is easy for them to say—on exactly when the power would be used and when it would not be used.

Victoria Saporta from the PRA stated:

“A formulation whereby the Government can force or direct us to make or amend rules that we have already made, and that fall squarely within the statutory objectives that Parliament has given us, may be perceived as undermining operational independence and all the benefits that I talked about earlier.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]

Those were really stark warnings from two of our key witnesses from the FCA and PRA, talking about the difficulties they had with this specific clause and how this could be seen as undermining their independence.

Martin Taylor went further in his evidence, when I questioned him on these intervention powers. He said:

“One of the problems that led to the recent turmoil—a very English description of what has just happened—was that the Prime Minister and the former Chancellor chose not to subject the mini-Budget to the scrutiny of the Office for Budget Responsibility.”

He continued:

“However, international investors looking at London will have noted this and it has a bad smell, if I can put it that way.”

Later, he said:

“If you were in Singapore or New York, you might be more tempted to do that than you would have been a month ago. We should not do anything else to make this worse. Everything is being done by the new Chancellor to steady the ship…but moves like this proposed measure just go in entirely the wrong direction as far as I am concerned. I think it is very dangerous.”–– [Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 76, Q149.]

Every single witness seemed to talk about the concerns they have over the level of intervention the Treasury could have over the Bank of England. I would like to hear reassurances from the Minister that he has been talking to the FCA, the other regulators and the markets about this. What reassurance can he give us that this is not HMT trying to again overrule our independent regulators?

Financial Services and Markets Bill (Second sitting)

Debate between Emma Hardy and Tulip Siddiq

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Emma Hardy]

Thank you.

[Tulip Siddiq]

Q The Bill provides reimbursement only for fraud victims who send money using the faster payments system. Do you think other payment systems should be included? Will you tell us a bit about that?

Paddy Greene: Yes. Similar to the comments that were made before, it is right to start with faster payments. We need to move to a model where we are absolutely confident—I heard the tail end of the previous evidence about different payment mechanisms and those that are emerging. We must have consumer protection baked in. We want consumers to have confidence and we know people are going to use such systems but, as we have said previously, they do not necessarily understand what is backed and the type of payment mechanism that is used.

In terms of what we want to see next, we are delighted with faster payments, but £79 million is already lost on CHAPS, on-us items and international payments. First, we need to make sure that the PSR and the Bank are talking properly about CHAPS, because when we are talking about CHAPS, we are talking about house purchases. For the people who are scammed during such a payment, there is a huge detriment, not financially but emotionally, and we know that fraudsters will adapt.

Our next steps, after we have got faster payments, are CHAPS and on-us, and we need to look at international payments. We need to make sure the regulator is looking at all the other designated payments and those that will come down the line, because we are seeing innovation, in order to make sure that the appropriate consumer protections are built in from the very start.