Santander has been fined £32.8m by the UK’s financial regulator in a landmark case after the lender failed to pass on £183m to the beneficiaries of customers who had died.
It was the first penalty of its kind levied by the Financial Conduct Authority. The regulator said on Wednesday that more than 40,400 deceased customers’ estates were affected over a three-year period by Santander’s failure to properly process their accounts and investments.
The FCA also took issue with the UK unit of the Spanish bank because it failed to inform the regulator about the extent of the problem, providing “selective” information.
“These failings took too long to be identified and then far too long to be fixed,” said Mark Steward, the FCA’s head of enforcement. “To the firm’s credit, once these problems were notified to the board and senior management, they were fixed properly and promptly. But recognition of the problem took too long. Firms must be able to identify and respond to problems more quickly especially when they are causing harm to customers.”
The FCA stressed that lenders’ duty to treat customers fairly does not end with their death.
While it is the first penalty handed out by the FCA to a bank over poor handling of probate and bereavement, Santander is not unique in having issues in the area: TSB — owned by another Spanish bank, Sabadell — had to apologise earlier this year to a small number of people after mistakenly identifying customers as dead and cancelling their direct debits.
UK Finance, the lobby group, has tried to make the bereavement process easier by setting up a one-stop notification process for all financial institutions.
In Santander’s case, the bank held on to the funds of deceased customers in some cases for many years without beneficiaries being aware of their existence, the FCA said.
The findings reveal that while the penalty is based on a three-year period, the weaknesses go back far further, to 1980, and legacy accounts at lenders including the building societies Alliance & Leicester and Bradford & Bingley, now owned by Santander.
Santander did not contest the FCA’s findings and co-operated to receive a 30 per cent discount on what would otherwise have been a fine of nearly £47m.
The bank said in a statement that it had traced and compensated the majority of beneficiaries of affected funds, and had changed the way it dealt with probate and the funds of customers who had died.
“Santander is very sorry for the impact these failings have had on the families and beneficiaries affected,” said Nathan Bostock, the bank’s UK chief executive. “We have now transferred the majority of customer funds and made significant improvements to our whole probate and bereavement process, ensuring we provide both a sensitive and efficient service to our bereaved customer representatives and those who are managing the estates of people who have passed away.”
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