August 4 2023

She had to go. You simply cannot have the CEO of a bank unable to understand that if a journalist asks you about a live story involving confidential details about a bank customer, the only possible response is “I can’t talk to you about that.” Especially not when a few days later you will be presenting the bank’s results and, therefore, are currently in possession of price sensitive market information. If you can’t keep quiet about the former, how can you be trusted with the latter?

What is surprising is that despite, according to reports, having two PR firms (one of them with expertise in “crisis management”) advising the CEO and another one advising the bank, this issue appears to have been handled in a somewhat reactive way, lacking in joined-up thinking or any coherent strategy. It might be wise to remember the advice given to intelligence officers: “A matter is of the highest possible importance and so should be handled at the lowest possible level.” This should never have reached the CEO’s desk in the way it did. And once there, handled better, it goes without saying.

Politicians and commentators have, predictably, piled in, most of them ignoring why she had to go and drawing the wrong lessons from what has happened, or the one which most comfortably suits their prejudices and obsessions, often filtered through whether they approve or disapprove of Farage.

• Kemi Badenoch, the Business Secretary and Minister for Women and Equalities, sought to remind banks that they must remember free speech and not discriminate on the grounds of political belief. She “hoped” banks would remember this. For the Minister for Equalities not to realise that the Equality Act protects “religious or philosophical belief”, political opinions do not automatically come within this category and it is only in Northern Ireland that public sector bodies (not banks) are under a duty to promote equality of opportunity between people with different political opinions is not encouraging.
• Other Tories have given the impression that they are only bothered about this because it happened to Mr Farage. Unwise. Ms Rose’s actions would have been foolish were it any bank customer.
• Farage himself has suggested that there should be a rolling back of AML and PEP requirements.

This would be a mistake. There is always a problem with rules such as these in that the amount of detail and checking needed can make the process so bureaucratic that it is easy to lose sight of what they are for, why this matters and why judgment should never be absent from the process. But ensuring that banks (and other professionals) are not used by bad actors to disguise their actions and give them a wholly undeserved veneer of respectability is essential if Britain’s finance sector is not to become a shady place for shady people, a risk for any significant financial centre.

Importantly, this row is not just or even at all an issue about political beliefs. Banks have obligations to “know their customer” – something considerably more than simply recording their name and address. Anti-Money Laundering rules are onerous, as are those for Politically Exposed Persons. Additionally, banks have to comply with equalities legislation. The Proceeds of Crime Act 2002 matters too. Quite considerably, given the various criminal offences banks commit if they fail to comply with it. Balancing all these different legal and regulatory requirements requires a proper understanding of all the relevant rules, overlaid with sound judgment.

Knee-jerk reactions rarely lead to good law, as this article explains more fully. Would that lawmakers understood this basic point.

Above all, banks do need to assess reputational risk – both in relation to who they take on as clients, who they do business with and, critically, how and why they exit them, if their risk appetite changes. This all needs careful consideration and even more careful – and consistent – recording and communication. It is not always easy to get it right. But saying that banks should never take into account the reputation of their customers is as absurd as saying that banks should only take on customers whose political beliefs they approve of.

Farage has also raised the “debanking” issue. Ironically, this might also be described as “inclusivity” – not the woolly-headed “I’d like to teach the world to sing” version so beloved of organisations thinking that the appearance of goodness is all that is needed to demonstrate their “values” – but the tension caused by having private profit-making companies provide vital services without which it is hard to be a fully functioning or contributing member of society: bank accounts / social media / transport / phones / internet access. If everyone needs these, should companies be obliged to provide them regardless of other considerations? And if not, who should?

If only there were a trusted and competent state-owned organisation which could provide such services, something like …. Oooh, I don’t know …. the Post Office? If only.

Darren Jones, the Business Select Committee’s Chair, inadvertently touched on this when he commented on the selectivity of the government’s concerns. He compared its rush to express dismay about NatWest’s behaviour, a company only 38% of which is owned by the government, compared to its silence over the Post Office – 100% owned. The government would do well to heed him on this.

Others (I’m looking at you, Rachel Reeves, Shadow Chancellor) have suggested that Ms Rose was bullied and treated unfavourably because she is a woman. (She did this in an interview in which she admitted not knowing the full story. The irony of saying this when commenting on a CEO talking about a matter on which she had not been fully briefed was apparently lost on her.) It is an easy to make – but ultimately misdirected – point. What do the careers of Cressida Dick and Dido Harding suggest then?

More seriously, it masks a more important point. Even a competent, highly regarded person can make mistakes, sometimes serious and career-ending ones. Even the most effective CEO can panic in a crisis and make elementary and stupid mistakes. One reason for needing strong and effective governance and staff with good judgment at all levels of an organisation is precisely to minimise the risk of this. Or, bluntly, to protect senior managers from their own foolishness. It can seem unfair that one error, even a “serious error of judgment”, should overshadow an otherwise effective career, as if all the achievements are not put – let alone weighed – in the balance. But this is one of the burdens of leadership. And why leaders are paid as well as they are.

It is possible for someone to do a good job overall but still make the sort of mistake that leads to resignation or sacking. That is an important lesson for all of us. No-one is – or should be thought of or think of themselves – as indispensable. That too is an important – if humbling – lesson.

Photo by Markus Spiske on Unsplash

May 7 2023

Remember the De Lorean fiasco? To provide jobs in Northern Ireland, the then government paid the bouffant-haired car designer to set up his factory there. It collapsed a few years later amidst missing money and fraud. Arthur Andersen, the auditors, who admitted missing obvious fraud signs, were banned from government work and sued. It was only when Blair won that the ban on AA was lifted and a risible settlement agreed. (Doubtless entirely coincidentally, AA had provided free advice to Labour in opposition. A “scratch my back and I’ll scratch yours” approach to favours has never restricted itself to one party.)

Fast forward a quarter of a century. Fujitsu, whose Horizon accounting system used by the Post Office, was responsible for the largest miscarriage of justice in British history, has suffered no similar penalty. Indeed, no penalty at all. Far from it. It has been rewarded with more lucrative government contracts; it has not paid any compensation; no company official has been held responsible.

Why? Well, one answer is that AA’s failures harmed the government. Whereas Fujitsu and the Post Office only harmed some lowly sub-postmasters and mistresses. A cynical take. But an accurate one. The brutal reality is that being in public ownership or a public service does not automatically mean an organization behaves well. Worse, it often means that when it causes harm to others, its primary interest is to protect itself – even at the expense of those it has harmed. This is not new. See how the Aberfan families were treated in the decades after the loss of their children. Or the victims of the blood contamination scandal or many other NHS scandals or Windrush.

This story shows a state – and many of its key functions: the Post Office, owned by the state, the criminal justice system, run by the state, and the responsible Ministers and civil servants – to be malign, incompetent, indifferent to the damage caused, defensive and determined (behind all the paraphernalia of inquiries, reviews, assessments) to delay the allocation of responsibility, effective consequences for those responsible and proper, timely compensation for those harmed. It is no consolation – nor anything for the rest of us to be proud of – that some judges, some lawyers, a few persistent journalists and 1 MP – James Arbuthnot – have battled and are still battling to ensure justice.

There has been a book, a podcast, a heartbreaking Panorama documentary. The Times has written some scathing editorials. The inquiry grinds on, lawyers argue about different compensation schemes, the police investigation into possible perjury by Fujitsu personnel has been announced. But nothing seems to happen. Meanwhile yet more postmasters die – 59 so far. Is that the plan? To wait until everyone is dead, then quietly bury whatever report is produced while those responsible get away with it and carry on making money? Apparently so.

It is cruel. It adds a further injustice to the original one. It displays a contempt for the people who have suffered and are still suffering. It displays an indifference to the human consequences of people’s acts and omissions, something all too easy to forget amongst the mass of wrongdoing patiently unearthed by courts and inquiries. That cruelty consists in holding out the promise of compensation while making the process of getting it long, complicated and difficult. Meanwhile, those responsible, both for the injustice and the delays, suffer nothing, withhold evidence from the inquiry and/or, grotesquely, award themselves bonuses and lie about it. On its website the Post Office says it wants “to remain one of the most admired institutions in the public sector”. “Remain“? “Most admired“? Both delusional and arrogant.

Why has this scandal not been taken more seriously?

• The very diffuse nature of the tragedy over two decades. Lots of individual stories, all heartbreaking. But no one event or place to focus on. No image. No buried school or trapped fans in a football pen or burnt-out tower. No anniversary. So it is easy for it to fade away into a complicated background, something to do with accounting and IT and legal stuff. No-one is going to sing their heart out for that. No Royal is going to visit and lay flowers.
• Worse – this was not just the wrong people convicted of a crime. There was no crime.  It is hard to get your head round the fact that hundreds of people were investigated, tried and convicted for crimes that never happened. How can this possibly be?
• The people to whom this happened come from all backgrounds, all over the country, of all ages. It makes it worse but also means they have no obvious representative to speak for them, no-one to whom they – collectively – matter.
• No political party has taken up their cause. All the major parties had Ministers responsible for the Post Office who failed to ensure that it behaved competently and then, when the scandal erupted, failed to ensure that it was handled properly. So they hide behind their pathetic claims that they weren’t briefed or didn’t realise or delegated or assumed that others were doing their job and are shocked and appalled and oh dear … blah blah .. and very sorry etc.,. What is the point of these junior Ministers if all they can do is hand-wringing avoidance of responsibility?
• Far too many groups behaved badly. What makes this so hard to comprehend is the overwhelming scale. Look at all those responsible: Fujitsu, those who developed, oversaw and sold Horizon, Post Office management at all levels, internal investigators, in-house lawyers, external lawyers, IT staff, those knowing something was wrong but saying nothing, Ministers, civil servants advising them, prosecutors, the judges’ ruling that the computer evidence should be believed (one of the stupidest judicial rulings made). All these, through their actions and omissions, are responsible; many continue to be responsible for the delays in giving the victims adequate compensation while they are still alive. Easier to forget or not engage at all.

Among all these failings, two deserve very close scrutiny.

The lawyers

There were obvious problems with the Post Office being its own prosecutor, the confusion between the role of investigators and prosecutors, the failures of those investigators, a lack of clarity about the duties owed and to whom by the in-house lawyers, failures to make proper disclosure, withholding key evidence, failure to speak up, conflicts of interest for the lawyers advising on the compensation schemes, lack of honesty, failure to understand or challenge the accounting and technical evidence (a persistent problem for the legal system – see the Sally Clark case) and so on. Bluntly, the Post Office ruined innocent people by lying, manipulating and subverting for its own commercial advantage the English justice system. Its lawyers were central to that. Many of those involved should be ashamed of – and deserve censure for – their unprofessionalism and behaviour.

The approach to the technical (in this case, computer) evidence

There is a tendency (not confined to the Post Office) to believe there is one technological system which will provide the answer to a problem; and believe only what that technology tells you. Both are foolish, dangerous impulses. (A lesson for us on the cusp of a new technological revolution.) When combined with working back from your desired conclusion (“we’re going to find fraud with our shiny new toy”), miscarriages of justice are all but inevitable. (Something for Holyrood to consider before proceeding with its judge-only rape trial pilot designed to increase convictions.)

What now?

3 people: the PM, the Chancellor, the Business Secretary need to stop hiding behind endless inquiries and legal to-ing and fro-ing and make it a top priority to get compensation paid promptly.

• Those MPs trying to help their constituents need to badger them until they do.
• The inquiry into responsibility must be uncoupled from the assessment and payment of compensation.
• Fujitsu should be given no government contracts until they pay compensation.
• The Post Office’s senior management needs replacing by honest capable people. A public explanation is needed for why it awarded itself a bonus scheme for complying with an inquiry set up to investigate its own failings and why it lied about it in its public accounts.

Meanwhile, remember the words of Desmond Ackner QC, Counsel for the Aberfan families, to the official inquiry. They apply as easily to Horizon as to a slag heap.

This was a slow growing man-made menace, fed by the indifference of those who should never have permitted its existence. That is the horror of this disaster. There can be no more bitter reminder of the truth and wisdom of George Bernard Shaw’s condemnation –

“The worst sin towards our fellows is not to hate them. It is to be indifferent to them. For that is the essence of inhumanity.”

Photo by Kutan Ural on unsplash.com.