Authorities sound alert on latest financial scam

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The Independent Online

As a cheque fraudster was being sentenced yesterday for stealing £1.5m, the Financial Services Authority (FSA) said that it was in discussions with the leading bank and building society trade bodies to tighten up the handling of cheques.

As a cheque fraudster was being sentenced yesterday for stealing £1.5m, the Financial Services Authority (FSA) said that it was in discussions with the leading bank and building society trade bodies to tighten up the handling of cheques.

Michael Hart, a Norwich financial adviser, pleaded guilty to 14 counts of theft. He had sold Abbey financial products to clients and asked them to pay with a cheque made out to Abbey. He had then taken the cheque to Abbey and had the funds paid into his own account.

Andrew Procter, the director of the FSA's enforcement division, said: "Abbey's involvement relates to the procedures whereby cheques made payable to the bank were paid into the account of the individual responsible for the fraud. Given the involvement of firms that we regulate and the losses to customers, the FSA is reviewing the general issues. To this end, we're in discussion with the relevant trade bodies about practices and risks relating to the handling of cheques made payable just to a bank or building society. In light of those discussions we will continue to consider whether any further action should be taken to reduce the risk of such cheques being used fraudulently."

An FSA spokeswoman added that the trade bodies contacted were the British Bankers Association and the Building Societies Association. Neither was available for comment.

The defrauded customers are banding together to seek compensation from Abbey. However, the Spanish-owned bank has been claiming that as these individuals were not yet customers of Abbey, it is not liable and claims should be made against the IFA firm for which Mr Hart worked. But it is understood that the firm, Lucas Fettes, does not have the resources to repay £1.5m.

While there is no suggestion of collusion between Mr Hart and any Abbey employees, the customers are claiming that the counter staff were negligent in agreeing to transfer the money into Mr Hart's personal account. The Financial Ombudsman Service is investigating.

The FSA said: "The onus is on the firms to minimise risk through their own management. Consumers should be alert when writing cheques and make sure that any cheques they write are made payable to the specific product account, as stated on the product document."

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