A £60,000 withdrawal, a lottery and a bereaved client
Margaret is 79 and has been a client of the firm for 22 years, holding a £250,000 portfolio producing about £9,000 a year of income. Her husband died four months ago, and she tells her adviser, Sam, that she has 'a lot to sort out'. On Friday she calls the service centre asking for a £60,000 withdrawal to a UK bank account in the name of 'Harlow Legal Services Ltd'. She says she has won €350,000 in a European lottery and must first pay a 17% 'release fee'. A man called 'Mr Ellis' telephones her daily and has told her not to discuss it with her family. She becomes upset when the agent asks questions and says, 'I've known this firm for decades'. The firm's procedure requires a call-back for withdrawals above £25,000 to a verification number held on file. The number on file is her late husband's mobile, which is disconnected. Sam is due to go on leave and Margaret has already emailed a signed instruction.
1. How should the firm handle the withdrawal instruction, and which conduct obligations apply?
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This has the shape of an advance-fee fraud, and the correct default is not to pay.
Foreseeable harm. Under the Consumer Duty (PRIN 2A), the firm must act to avoid foreseeable harm to the client and support her in pursuing her financial objectives. Sending £60,000 to a company she cannot identify, in response to a 'release fee' for a prize, would cause harm the firm can see coming. A lottery that requires an upfront payment to release winnings is a classic indicator, as is daily contact from an intermediary, an instruction not to speak to family, and urgency.
Vulnerability. FG21/1 identifies drivers of vulnerability: health, life events, resilience and capability. Recent bereavement, isolation, and distress on the phone all point to heightened vulnerability. The firm must adapt its process, not abandon it - slower, clearer, with a named person and repeated explanation.
The firm's own procedure. A call-back is mandatory above £25,000, and the verification number is dead. The firm cannot verify the instruction on the number held, so it cannot treat the call-back as completed. It should not substitute a number supplied in the email from the client without enhanced checks.
Practical steps. Do not execute. Escalate to a senior manager and the MLRO the same day. Check the payee against the client's known payees and run a bank account name verification. Have a senior person speak to Margaret calmly, explain the scam pattern generally, and offer to call back later with her consent and, if she agrees, to involve her family. Hand over from Sam rather than letting the request sit while he is on leave.
2. What are the money-laundering reporting issues, and what may the firm tell Margaret?
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The suspicion is real, and it cuts two ways. Margaret appears to be the victim of fraud, and the receiving account may be the account of a third party using 'Harlow Legal Services Ltd' as cover - potentially laundering the proceeds of that fraud. MLR 2017 and POCA require the firm to make an internal SAR to the MLRO, who decides whether to submit an external SAR to the NCA. The firm may also want the NCA's consent to continue, which brings a moratorium period during which the transaction can lawfully be delayed.
Tipping off. Section 333A of POCA makes it an offence to disclose information likely to prejudice a money-laundering investigation. The firm must not tell Margaret that a SAR has been made or that she is under suspicion. That does not mean it must lie or refuse to engage. FCA guidance and normal practice allow the firm to talk to the customer about the transaction itself - that the payment looks unusual, that this pattern matches known frauds, that the firm wants to check before sending money - provided the MLRO is satisfied this does not prejudice any investigation. The safest course is to agree the wording with the MLRO before the call.
Record keeping. Log the indicators, the failed call-back, the accounts and names, the calls with Margaret, the escalation timescales, and the decision and its rationale. If the account is later used in a fraud investigation, the firm's record will be the evidence that it acted reasonably.
Do not let a desire to be helpful turn into processing the payment 'because she insisted'. Her consent does not neutralise the firm's own obligation.
3. Margaret complains that the firm has no right to block her money and threatens to move her portfolio. How should the firm respond?
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Take the complaint seriously and handle it properly. Treat it as a complaint under DISP: acknowledge promptly, investigate, and issue a final response within eight weeks, with reference to the Financial Ombudsman Service if she remains dissatisfied. A complaint about a delayed payment is not an admission that the firm was wrong to delay it.
Explain the legal position honestly. The firm is not refusing to return her money permanently. It is pausing to verify an instruction that its own procedure requires it to verify, and because it has reasonable grounds to believe the payment is connected to a fraud. It can offer alternatives: a smaller test payment, payment to an account in her own name held with a known bank, a branch visit, or a joint call with her daughter if she consents. Reframing the request as a delay with a route forward reduces the sense of being overruled.
Do not be bounced by the threat to transfer. She is entitled to move her portfolio, and the firm must facilitate a transfer in the normal way and in the normal time. But a threat to leave does not create an obligation to send money to a suspected fraud, and the firm should record that it considered the threat and was not influenced by it.
Escalate the relationship. Assign a named senior contact, involve the adviser on his return, and consider whether a third-party authority or attorney should be discussed if her capability appears to be declining. Ensure the file captures the vulnerability assessment, the Consumer Duty reasoning on foreseeable harm, and the MLRO's decision. If the money is later lost to the scam, that file is what distinguishes a firm that protected its client from one that simply executed an instruction.