Mr S (PO-14071) (re member identity due diligence)

TPO has rejected an appeal against an adjudicator’s decision, finding that a provider’s enhanced due diligence checks to verify an overseas member’s identity were not excessive or onerous.

Background

Money laundering offences were governed by The Money Laundering Regulations 2007 until 26 June 2017, and from that date, by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Both sets of regulations require relevant persons to undertake customer due diligence which can be simplified or enhanced depending upon an individual’s circumstances.  Relevant persons in a business relationship must also conduct ongoing monitoring of existing customers when appropriate.

For information on how these requirements apply to pension scheme trustees, please see our Alert.

Facts

Mr S was a member of three UK pension plans with Scottish Widows, but lived in Mexico.

In March 2016, Mr S asked Scottish Widows to take the maximum tax-free cash from his policies.  He asked to be contacted by email not post, as letters could take three months to arrive.

Scottish Widows asked Mr S to provide identification and verification documents in relation to the plans, including proof of name and address, and gave a list of acceptable evidence (eg national identity card, utility bill).  Mr S explained why he could not provide the requested documents and offered alternatives.

Scottish Widows continued to write to Mr S stating that they required verification of his identity, ultimately informing him that they would not be able to process his request, and, as they had received no reply to various requests for information, that they would be terminating his claim.

Mr S requested Scottish Widows’ internal dispute resolution procedure, but Scottish Widows did not provide it.  Mr S then complained by email.  Scottish Widows offered to call Mr S in response, but as he had a hearing impairment he felt this was an inappropriate way to handle his complaint.

Scottish Widows then tried to find alternative ways for Mr S to fulfil its requirements.

Mr S complained to TPO, arguing that Scottish Widows’ requirements were excessive and that its actions had been unhelpful, and that as a result of the delays, the value of his policies had dropped significantly.

Adjudicator’s decisions

The adjudicator held that no further action was required by Scottish Widows.  After review of the initial decision by TPO, the adjudicator gave a second opinion partly upholding Mr S’ complaint, and making an award in respect of the distress and inconvenience suffered.

Mr S appealed to TPO.

TPO’s determination

TPO held that the requests made by Scottish Widows were in line with money laundering requirements and HMRC guidelines, and dismissed that part of Mr S’s appeal.

Regardless of whether the 2007 or 2017 Regulations applied, the outcome was the same: Scottish Widows had an obligation to carry out customer due diligence on existing customers where, for example, the customer’s circumstances had changed, and HMRC’s guidance stated that “enhanced due diligence must be used when a customer is “not physically present” for identification checks”.  In addition, the cross-border nature of the transfer raised red flags.

Scottish Widows also had a responsibility to carry out ongoing monitoring of its customers and maintain up to date records.
Money laundering legislation gives some discretion as to the due diligence a body may undertake, and Scottish Widows’ requirements were not excessive or onerous.  It was entitled to ask for the documents it did in the format it did, and although it should have taken Mr S’ circumstances into account, that did not extend to having to accept verification documents by email.

In line with the Adjudicator’s award, TPO found partially for Mr S, holding that Scottish Widows had not been sufficiently “customer focussed” (although that did not override the responsibility to carry out money laundering checks).  Its continued use of post had been unhelpful and prolonged the process, but did not amount to maladministration.  Scottish Widows was ordered to pay Mr S £1,000 for the serious distress and inconvenience suffered.