This essentially means that we will be responsible for gathering relevant information and documents, assessing that material, reaching conclusions on the basis of that evidence and making a decision. As Sir Ross Cranston said, “there is no onus of proof on the Customer, given that this will be an inquisitorial process where the Panel does the work.” In practice this means the following:
Where we consider that the material in the Customer Review File is deficient, we will seek information and documentation from the Bank and/or the Customer and share it appropriately. We will take account of what is said at any meeting or otherwise contributed by the Customer. We will advance our inquiries in this way in an effort to ensure we have identified the relevant information before producing a ‘minded-to’ decision on the award. This approach provides flexibility for us to deal with each Customer’s case in an appropriate manner. It is designed to minimise the need for legal representation or other professional involvement at the ‘information gathering’ stage.
In respect of each of the Companies in the Customer Review there is a Customer Review File. This contains electronic versions of documents generated during the Customer Review process, including the Customers’ submissions. In relation to each Company there are also Hard Copy Files, comprising hard copy documents for each Company or ‘connection’ compiled from LBG’s records, many of which, we understand, run to many hundreds of documents. These Hard Copy Files were assembled in the “file build” process described by Sir Ross in ‘The Cranston Review’ and were, we understand, supplemented by selective searches of the Recommind database (the Bank’s electronic document repository containing in excess of 15 million electronic records).
Sir Ross made significant criticisms of the way the Bank handled issues concerning documents during the Customer Review, particularly in respect of the non-disclosure of documents relied upon, the interpretation of those documents in the file that were prepared by the fraudsters and the significance of the absence of some documents from the file given the fraudulent activity. However, the analysis of the files in the 16 sample cases undertaken by FTI Consulting LLP, on Sir Ross’ behalf, demonstrated that in 14 of those cases there were no material information gaps. In the two cases where gaps were identified, further, more focused, searches did reveal further relevant documentation.
Against that background, Sir Ross has recommended that “the structure of the Re-Review Process should be built around the work undertaken for the Customer Review, in particular the Bank’s file build (i.e. the documents collated by the Bank in relation to each Customer Review File) and, importantly, the submissions of Customers.” We have taken those recommendations on board in developing the process we follow.
If the Customer, in responding to an information request, alerts us to the existence of a document or class of documents that we are persuaded is potentially relevant and that is not already referred to in the Customer Review File, we will undertake a reasonable, proportionate and focused search of the Hard Copy Files and the Recommind electronic database provided that sufficiently specific search parameters and directions have been provided by the Customer.
It may be, of course, that none of the requested documentation can be found. Given the background of fraud, we recognise, for example, that taking some documents at face value may not be appropriate. Equally, that the absence of certain documents that one might have expected to be present may not be as relevant as in normal circumstances. We will be alive to issues of this nature when we consider a Customer’s case.
As explained in the Scope and Methodology Statement, we are required to consider whether a Customer was a victim of the IAR Fraud as a first step and this question will be our main focus when we start considering a Customer’s case.
Where we can conclude on the information available that a Customer was a victim, we will issue a short written decision to that effect to the Customer, called a Victim Status Decision.
Unless we specifically request further information we will not require submissions from the Customer at this stage. Where we are unable to conclude from the information available that a Customer was a victim we and our team will conduct a full inquiry and will request further information from the Customer at that stage.
If following the information received we are still not able to conclude the Customer was a victim, we will issue a ‘minded-to' decision (MTD) explaining the reasons and attaching all the relevant documents for the Customer to consider and respond to. If Customers require professional support, this will be funded as described here. We will consider all challenges raised by the Customer in the post-MTD stage before issuing a Final Decision about victim status.
Customers who receive a Victim Status Decision, where we have concluded they are a victim, will be given a one-time only opportunity to take a Fixed Sum Award of £3 million net of tax.
If the Customer accepts the offer within the one-month decision window they will sign a binding agreement with LBG accepting the Fixed Sum Award in full and final settlement and satisfaction of any D & C losses they may have suffered due to the IAR Fraud and will exit the Re-Review. We will not conduct any further inquiry into that Customer’s case and the Customer’s losses (if any) arising from the IAR Fraud will not be assessed. Guidance on the key features of the Fixed Sum Award option compared to staying in the Re-Review can be found here.
If a Customer who receives a Victim Status Decision does not accept the Fixed Sum Award within the decision window the Customer will remain in the Re-Review and we will go on to assess the impact of the IAR Fraud upon the business and the Customer and the amount of any losses which the Customer has sustained as a result.
We will issue a ‘minded-to' decision (MTD) setting out our analysis and attaching all the relevant documents for the Customer to consider and respond to. If Customers require professional support, this will be funded as described here. We will consider all challenges raised by the Customer in the post-MTD stage before issuing a Final Decision.
Where we have concluded that a Customer is a victim of the IAR Fraud we will issue a Victim Status Decision to that effect and the Customer will be offered the Fixed Sum Award (explained in more detail here).
If the Customer remains in the Re-Review after receiving that Victim Status Decision they will receive an interim payment of £250,000 (net of tax). They will need to sign an agreement with LBG to enable them to accept the interim payment and the sum will be paid within 14 days by LBG. The agreement will confirm that the amount must be offset against any Final Award higher than £250,000 that we may make in the Final Decision as regards the Customer’s D & C losses.
However, if we conclude in the Final Decision that the D & C losses suffered were less than the £250,000 interim payment, the Customer will not have to pay back any of this sum as it is non-refundable.
More information about interim payments can be found here.
Following discussions between the Panel, LBG and the stakeholder groups, LBG has agreed to make interim payments to Customers in certain circumstances after the Panel has issued a ‘minded-to’ decision (MTD). Those circumstances are described here.
We will take the initiative in informing Customers if the circumstances that permit the making of such a payment exist in any Customer’s case. It will not be necessary for a Customer to ask us to do so.
The Customer will need to sign an agreement with LBG to enable them to accept the interim payment and the sum will then be paid within 14 days by LBG. The agreement will confirm that the amount must be offset against any Final Award that we may make in the Final Decision as regards the Customer’s D & C losses. That is, if the amount of the Final Award is lower than the interim payment the Customer will have to return the amount that exceeds the Final Award, apart from the first £250,000 which is non-refundable.
We are aware that some Customers have been declared personally bankrupt following the involvement of their business with the IAR. They may have been discharged from bankruptcy and hence may be either bankrupt or formerly bankrupt.
In either case, where such a Customer is found to be a victim by the Panel, any award (including the Fixed Sum Award) or any interim payment that they would be entitled to receive will be subject to treatment under relevant insolvency laws and the Trustee in Bankruptcy will have to be involved.
We have produced a guidance note for Customers here that sets out the various scenarios that might arise and explains what will happen to any award or interim payment that may be due.
We have also produced a flowchart diagram here to accompany this guidance showing each of the various steps and scenarios that might arise.
This is the usual test applied by a court in civil proceedings when deciding whether, on the evidence, something in the past happened. If a court concludes that it is more probable than not that the event occurred, the court will conclude that it did occur. It is sometimes said that if the court decides there was more than a 50% prospect that the event occurred, then the event will be held by the court to have occurred. Although we are not acting as a court, Sir Ross has recommended that we should apply this test to the actions that Customers say they would have taken in the Non-Fraudulent Scenario. We will do so, but we will take a generous view of this test, given the background and our general approach.
The chance that a third party, such as a Hypothetical Reasonable Bank, for instance, would have acted in a certain way in the Non-Fraudulent Scenario will be assessed and expressed in percentage terms. This will reflect how likely it is that the third party would have acted in that way. The more likely it is that the third party would have acted in that way, the higher the percentage will be. For example, a 70% chance is higher than a 30% chance, but each is a chance. This means when considering third parties’ actions, we do not need to conclude that there was a greater than 50% chance of the third party acting in certain way in order to take those actions into account. This is different from considering the likelihood of a Customer’s actions in the Non-Fraudulent Scenario. That will be assessed on the basis of whether the Customer’s actions were more likely than not – in other words, is there is a greater than 50% chance that the Customer would have taken those actions? As indicated above, we will take a generous view of that test.
Customers are entitled to challenge any aspect of the MTD and if the Customer wishes to engage professional support to enable them to respond to the MTD they will be entitled to funding for all reasonable professional costs of doing so as set out in the policy and guidelines for professional fees here.
To assist Customers, we have prepared guidelines on how we will approach challenges to an MTD here.
This law allows a client to keep private their communications with lawyers for the purpose of seeking or giving legal advice, whether written or oral, and not to disclose them to anyone else, including a court. The client (but not the lawyer) can “waive” their privilege so that the communications can be revealed.
In certain circumstances, the law protects private information so as to keep it secret and prevent it from being shared. In order to qualify for legal protection in this way the information: (i) must itself be private or confidential information (e.g. not available in the public domain); and (ii) must have been provided in a way that the person receiving it knew, or ought to have known, that the information was confidential. Almost any type of information can be confidential information if these two conditions apply, including both commercial information and personal information.