Why have Pension Scams remained so pervasive in a Sophisticated World?
For those in the pension industry invested in seeking to prevent pension scams, the last 10 years has been a challenging time. The extent of scams involving pensions has become a serious problem. Whilst enormous effort is being expended by government and industry, not least the Pension Scams Industry Group (PSIG), scams continue to evolve and claim the savings of far too many pensioners. But why is that, surely the sophisticated online world we enjoy should be protecting us from the scammers?
It is true that pension providers just like banks are increasingly automated with sophisticated online systems. If you want to do something involving your finances, you probably go online and struggle through the bewildering world of online security, passwords, memorable phrases, favourite pet, etc. If, in desperation you seek help from an actual human being, you discover how impenetrable these institutions are. Unsurprisingly, there is very little that creates any form of relationship or even trust with large financial institutions, devoid of any human contact. Perhaps, it should not come as any surprise that online scams are growing like crazy with a scammer pretending to be someone they are not – how can customers recognise it’s a bad character?
Unlike the financial institution, the scammer will most likely be talking to the customer. Using partial information they have on the customer. Faced with such a refreshing novelty the customer probably has a warm glow that someone is paying them attention…the scammer knows things that only a financial institution should know – possibly because of data leaks from this or other businesses the customer works with. Can the customer be blamed for doing what is being asked of them?
Perhaps one of our industries greatest problems is engaging with our customers. Even if institutions spoke to their customers once a year, people might have some idea of how their provider acts and what the company sounds like and perhaps the customer might even be prompted to call their provider when faced with something unusual because they know someone they have spoken to before.
The recent and peculiar events involving Coutts Bank and their closure of Nigel Farage’s bank account shed some light on the problems. It is clear that a considerable amount of effort doesn’t go into getting to know their customers by talking to them, it goes into dealing with the latest regulatory ESG (Environmental, Social, and Governance) and AML requirements (Anti-Money Laundering) and considering if the customers values align with those of the financial institution.
As an aside – whilst it seems unlikely pension providers will be exiting customers with the frequency currently being seen by banking institutions, providers may soon struggle to find commercially acceptable banking arrangements especially for customers that are high risk or politically exposed persons, due to the significant costs incurred by these institutions under increasingly draconian AML regulations.
The ever-increasing sophistication and complication of doing business risks impacting the vulnerable the most. They are being disenfranchised and discriminated against by the increasingly complex online and automated systems and being left most exposed to the scammer, with frequently no clear relationship pathway to clarify their confusion.
Roger Berry
Vice President, Guernsey Association of Pension Providers (GAPP) and member of the Pension Scams Industry Group (PSIG) Technical Group & Advisory Board
