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TSB suffers 10,000 fraud incidents since IT meltdown - business live TSB suffers 10,000 fraud incidents since IT meltdown - business live
(35 minutes later)
Morgan points out Pester said at the last hearing that people were waiting only three minutes on the fraud line.
Pester says at the last meeting we had not been subject to fraud attacks at that level, it started on the first bank holiday in May, peaked on 15 May, then came under control since. At first meeting we were not subject to those levels of attack.
That was the true statement of the situation at the time.
I am sorry if I appear to have been unforthright in evidence.
Pester says the system tracking fraud still blocks accounts if it detects unusual patterns etc, so there are other ways than just customer reporting fraud.
Morgan says fraud system hasn’t been working properly though.
Pester says the volume of attacks were 70 times the normal level of attacks. That overwhelmed TSB. So we put in a dedicated line.
Fraud is a terrible experience. That fraud line has a two to three minute wait time. I apologise profusely to those customers who have suffered fraud.
Pester says it is still the same team, but we recruited more partners so we could respond more quickly.
Morgan asks how long people have waited over recent weeks.
Pester says it is a priority line so it is a matter of minutes. We have tightened up our fraud defences, and now volume is two or three times normal level.
Morgan says people are talking about waiting for hours.
Pester says that was before the new line. He apologises again and says it was unacceptable. The level of fraud was unprecedented.
But Morgan says in your planning you anticipated an increase in fraudulent activity, so it wasn’t unprecedented.
Pester says sadly yes, we had our teams on high intensity when we migrated but it was higher than expected.
I have been shocked to read of customers waiting five, seven, nine hours. When I saw that I said we had to fix this. Putting a new line in was very important.
Now TSB are up and Nicky Morgan begins with the issue of fraud.
Question: Have conditions create a spate of fraudulent activity?
Pester says he regrets but the situation gave an opportunity for fraudsters to target customers.
Morgan says they have to phone a dedicated fraud line, and is the route to get compensation.
Pester agrees but they says customers can report fraud to branches or online, but there is a dedicated line.
Ultimately though it all ends up with fraud team.
The FCA session ends on that note.
John Mann ask who should be held to account?
Bailey says that’s the purpose of the investigation. But at the moment the most important thing is to dig out of hole.
Mann says will you use the full range of your powers?
Bailey says we will use the powers.
Question: The last IT meltdown was Co-op. How many other banks are at similar risks with antiquated IT systems?
Bailey says there are major IT changes going on most weekends in the banking systems. This year in particular there has been ringfencing.
In this case it was a complete replatforming, from the Lloyds sytems to a new one.
Most institutions are operating on systems which have evolved over years.
[In terms of risk for other banks] Bailey says he hopes not but you never know.
There is a lot still to learn about this one, he says. What would it take for us to observe this in a way TSB management did not, what level of intrusion would be needed?
We were involved in the Visa incident, that was a hardware failure. We seek to learn but can’t give an assurance these things will never happen again.
Question: Will you set out what minimum compensation should be?
Bailey says we will want to see how they set it up and calibrate it. There should be a minimum standard below which compensation applies. Services have not been affected evenly, this is one of the problems.
Bailey is told the FCA should set down the law otherwise people will not have confidence, especially given the problems small businesses have faced with banks, especially GRG.
Bailey says he hopes they appreciate how much the FCA has been involved with TSB. He says the FCA put a team on site very quickly.
Question: TSB have appointed Deloitte to look at compensation, how is it going?Question: TSB have appointed Deloitte to look at compensation, how is it going?
Bailey says we are pleased they have brought in outside resources, they have been overwhelmed. They are taking it seriously but we want to see it up and running.Bailey says we are pleased they have brought in outside resources, they have been overwhelmed. They are taking it seriously but we want to see it up and running.
Howard says they are recruiting staff to deal with compensation. They have started to resolve and settle complaints.Howard says they are recruiting staff to deal with compensation. They have started to resolve and settle complaints.
Bailey says this should happen quite quickly, it is not very complex. The timeline is short in terms of when things went wrong.Bailey says this should happen quite quickly, it is not very complex. The timeline is short in terms of when things went wrong.
Question: In some cases when customers asked to switch, bank has written to some of their direct debit accounts saying they had died, are you aware of this?Question: In some cases when customers asked to switch, bank has written to some of their direct debit accounts saying they had died, are you aware of this?
Bailey says that is another example of putting in a fix in to solve a problem and another part sends out a letter. Don’t think they did that intentionally.Bailey says that is another example of putting in a fix in to solve a problem and another part sends out a letter. Don’t think they did that intentionally.
Question: Does it undermine the system if people see this happening and are reluctant to switch.Question: Does it undermine the system if people see this happening and are reluctant to switch.
Bailey says longer term we will have to see the level of switching and if it is happening effectively.Bailey says longer term we will have to see the level of switching and if it is happening effectively.
Question: are you confident no other banks do this?Question: are you confident no other banks do this?
Bailey says I think we would know that.Bailey says I think we would know that.
Sutherland says it’s a TSB issue.Sutherland says it’s a TSB issue.
Question: Who controlled the timing of migration of IT systems {TSB or parent company?]Question: Who controlled the timing of migration of IT systems {TSB or parent company?]
Bailey says that will be a major part of the investigation. It was utilising [parent company] Sabadell’s platform but the responsibility rests with TSB managment...Bailey says that will be a major part of the investigation. It was utilising [parent company] Sabadell’s platform but the responsibility rests with TSB managment...
But this can’t descend into finger pointing. But this can’t descend into finger pointing [between TSB and Sabadell]
On the question of accountability, Bailey says in this case there is a relationship with an outsourcer (in this case part of the parent company). You can’t outsource responsibility, and it rests with the management of the TSB.On the question of accountability, Bailey says in this case there is a relationship with an outsourcer (in this case part of the parent company). You can’t outsource responsibility, and it rests with the management of the TSB.
Question: have TSB now got it right?Question: have TSB now got it right?
Bailey says they have improved considerably. The days of the rather generalised and rosy statements, we haven’t seen them so often. But it is still important, there are a lot of things going wrong in branches, quite basis and important things. These things still need fixing and it will take time.Bailey says they have improved considerably. The days of the rather generalised and rosy statements, we haven’t seen them so often. But it is still important, there are a lot of things going wrong in branches, quite basis and important things. These things still need fixing and it will take time.
Question: were your expectations on communications reflected in Pester’s testimony.
Bailey says it should have been a more thorough and balances communications situation.
My bias would be tell it as it is and communicate extensively.
Question: have you ever issued a letter quite like this before, including saying Pester was too optimistic and statements to the public were poor?
Bailey says we don’t have these situations too often.
Some parts of the bank’s service are functioning, and it’s fair enough to point that out but there is a danger of overemphasis of that which gets away from the fact there are parts that are troubled.
Sutherland says they have a torrid time with the branch systems, leading to very busy branches. It’s quite clear those systems problems still exist. It’s the bits that are not working we are not hearing so much about.
Here’s what FCA chief Andrew Bailey told MPs about the fraud attempts on TSB customers (at 2.40pm)
I”m going to be a little bit circumspect about what we say about fraud…as we don’t want to give information that fraudsters could use against the firm.
We think there’s been just over 10,000, 10,600, incidents, and that has resulted in a level of payout.
FCA special advisor John Sutherland then explained how the number of ‘alerts’ of possible fraud are still rising. These alerts lead to customer accounts being blocked or stopped while the situation is investigated - but TSB is struggling to cope.
Sutherland said:
“TSB is resourcing up to clear those alerts as soon as they can, but they are still on an upward trend.
That doesn’t indicate so much that there is an increasing amount of fraud, it’s just that they not resourcing themselves yet to clear them fast enough.
Sutherland then talked about the “huge variability” in TSB’s ability to handle calls from customers who may have been defrauded, with just one in 10 getting through at the busiest times. Clearly that’s not acceptable.
Question: Do you feel TSB has adhered to the requirements on communcating the situation.
Bailey says we have had some frank conversations about communications, and we said in our letter we were not satisfied.
There is an onus of overcommunication, to tell customers what is happening. There is uncertainty at the start about what the situation is.
Looking at the daily service levels, they were very volatile. Looking at averages doesn’t give the entire picture.
There should have been more communication and it needed to be more reflective of the fact it was a volatile and uncertain situation. Its not easy to communicate volatile. But otherwise you see a lot of criticism from customers.
A more straightforward recognition of what the situation was would have been helpful.
Has TSB always co-operated?
Bailey says yes, they are working very hard, I do not want to call into question their hard work. They are in a hole and they are trying to get out of it.
That is not the issue. The issue is how did you get in and how do you get out of it and protect the interests of customers.
Bailey is asked about the suggestion that TSB chief executive Paul Pester had some information including slides from IBM which he did not share with the previous hearing.
Bailey says IBM were brought in on the Wednesday, by the following Sunday they had produced slides of the issues. We saw those on Sunday, the hearing followed on Wednesday.
They are not definitive but they do point to things. At the hearings, Pester said IBM believe issues are in the middleware.
But it appears to be not just in the middleware, which the IBM slides show.
Question: where are we in timeline for having a coherent plan for the recovery of services?
Sutherland says there is a rolling fortnight forward plan for fixing faults in IT, but we haven’t seen a plan for getting back to where we were before migration.
Bailey says one of the reasons they brought IBM in was they didn’t have that plan, IBM are helping put that plan in.
Question: does TSB understand the problems, and have the root causes been found?
Bailey says the understanding of the problem has evolved over time. It is still evolving, I do not regard that as particularly negligent.
The rate of emerging faults is falling off, as you would expect.
It would be wrong to speculate [about our investigation] but testing will be one of the key questions. How robust and rigorous was it.
They have put a fix in, and something else happens elsewhere in the architecture, and messages are sent to customers which shouldn’t be. So that gets back to testing.
Question: when was FCA first told about the TSB problems?
Bailey says the first warning that the FCA got was on the Sunday evening, we were notified at one minute to nine o’clock.
They were going live at 6 o’clock, they first identified problems at 6.20.
We heard just before 9,. we had the first call just around midnight.
The FCA response was activated the next day.
Morgan says FCA says they had not met standard for repaying fraud, why was that?
Bailey says they were initially overwhelmed.
The FCA’s Sheree Howard says, they have now prioritised that.
Morgan says is there a pattern of TSB trying to argue the case before refunding.
The FCA says no.