The bank Santander has been fined £32.8m by the UK’s financial regulator, the Financial Conduct Authority (FCA), after it failed to pass on £183m to the beneficiaries of customers who had died.
In a landmark case, the FCA found that Santander failed in its duty to the relatives of deceased customers, breaching rules that require banks to take reasonable care to organise and control the bereavement and probate process responsibly and effectively.
This is the first penalty of its kind levied by the FCA against a bank over poor handling of the bereavement and probate processes.
Why was Santander fined?
The FCA found that Santander failed to transfer more than £183m to beneficiaries when it should have done, with a total of 40,428 customers directly affected over a three-year period. The FCA also found that, once the bank became aware of the issues, it failed to inform the financial regulator about the extent of the problem.
Mark Steward, Head of Enforcement at the FCA, said “These failings took too long to be identified and then far too long to be fixed”, stressing that a lender’s duty to treat customers fairly doesn’t end with their death.
Santander acknowledged the FCA’s findings and said it was “very sorry” for the problems. Its co-operation with the regulator has resulted in the bank receiving a 30 percent discount on what would otherwise have been a £47m fine.
What went wrong in probate process?
The FCA found weaknesses in how Santander organised and controlled its bereavement and probate processes, with the bank:
- failing to follow-up on communications with representatives of deceased customers, which increased the likelihood of cases not being closed;
- ineffectively monitoring open probate and bereavement cases at the bank to determine progress;
- failing to effectively identify all the funds it held which formed part of a deceased customer's estate; and
- unable to determine whether cases had progressed to closure.
As a result, Santander’s ability to identify all the funds of deceased customers was reduced and those entitled to the funds often weren’t notified of their existence, even when the bank was explicitly told that customers had died. In some cases, funds were held by the bank for years, leaving beneficiaries deprived of their rightfully owed money.
While the penalty is based on the three-year period between 1 January 2013 and 11 July 2016, the FCA’s investigation revealed that these process issues go back much further - to 1980 and legacy accounts at building societies such as Alliance & Leicester and Bradford & Bingley, which are now owned by Santander.
Nor is Santander unique in having issues in this area. TSB also had to apologise last year after cancelling the direct debits of customers they had mistakenly identified as deceased, but who had actually switched banks.
"I have come across errors of judgement by a variety of banks, in that they do not insist on a grant of probate to be sure that they are paying the money that belongs to a deceased person to the correct person entitled," she said.
Making the probate process easier
UK Finance, a lobby group, has responded to this problem by launching a service that allows people to report the death of an individual to multiple financial institutions at the same time.
The free online Death Notification Service simplifies the process of letting bank or credit card providers, or other similar organisations, know that someone has died. It was launched as part of an industry-wide effort to improve the experience of customers during bereavement.
Santander have signed up to this service, along with Barclays, HSBC, Lloyds Bank, Nationwide and RBS. Internally, Santander have also taken steps to improve its probate and bereavement processes and prevent such issues from happening again. It says it has conducted a “comprehensive” tracing exercise to identify and transfer funds to the right beneficiaries, with compensation included “where appropriate”.
It has also conducted a “root and branch review” of its probate and bereavement processes, making changes to ensure representatives of deceased customers can notify the bank of a death in-branch, online, by post or phone, or through the Death Notification Service. The bank also now has a dedicated bereavement team, with specialist training, to handle all such cases.
Santander UK Chief Executive Nathan Bostock apologised to those affected by the problems. “Santander is very sorry for the impact these failings have had on the families and beneficiaries affected. We accept the FCA’s findings and have fully cooperated with their investigation.”
How can Clarion help with the probate process?
Our Private Client Team acts for personal representatives (executors and administrators) when someone dies. We explain to clients and, if necessary, assist in obtaining details of accounts and assets from financial institutions. We also strongly recommend searches of a register of historical assets which for a fixed fee can search for lost, dormant or unknown assets. This service has regularly found unknown accounts, shareholdings and investments for our clients which otherwise would have been missed. Personal Representatives are themselves under a duty to make sure they investigate as much as possible the potential assets of the deceased, and personal liability can arise if they do not do so.
If you would like to discuss the administration of an estate or any other Private Client matter, please contact a member of our Team.
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