The UK's Financial Conduct Authority has fined Santander for failings in its probate and bereavement process, claiming that it principle 3 (management and control), principle 6 (customers' interests) and principle 11 (relations with regulators) of its Principles for Businesses.

It not been easy for banks in the UK to develop effective probate and bereavement processes and the FCA admits this in Santander's decision notice, but it also finds that the bank's considerable efforts to make improvements fell short of its exacting standards.

Santander’s probate and bereavement process contained weaknesses which: (i) reduced its ability to identify all the funds it held which formed part of deceased customers' estates effectively; and (ii) resulted in it failing to effectively follow up on communications with deceased customers' representatives, thereby increasing the likelihood of probate and bereavement cases not being closed; and (iii) led to it monitoring open probate and bereavement cases (to allow it to determine whether cases had been closed properly) ineffectively.

The two main practical consequences of this for those Santander customers who were affected and those who represented them on their deaths were that the probate and bereavement process (i)
commenced but stalled and remained incomplete, with the consequence that funds were not transferred to the people who were entitled to them, despite Santander being informed about the deaths; or (ii) commenced and seemed to reach its completion, but with certain funds that belonged to deceased customers not being identified and transferred to the people who were entitled to them. These people remained unaware of those funds' existence.

Among the accounts that suffered from "deceased customer accounts issue," as the FCA calls it, 40,428 customers were directly affected with funds totalling more than £183 million not being transferred by Santander when they should have been. The funds of 36,059 of those customers were dealt with by Santander’s principal remediation exercise (Project Panther, as it was known). This represents 3.9% of the total number of Santanders' customers who died between 1 January 1980 and 31 December 2014 with accounts or products that came within the reach of the exercise.

A dead customer often leaves another, potentially vulnerable, consumer behind in his wake. His vulnerability may take one of two forms: (i) he might represent the deceased customer and might have been his relative or friend, might feel overwhelmed by the probate and bereavement process and might therefore require careful treatment by the bank's staff; and (ii) such a representative may not be aware of all of the deceased customer’s accounts at the bank, relying instead on the accuracy of the process used by the bank to identify details of the extent and value of these accounts. According to the FCA, Santander failed to make adequate allowance for the potential vulnerability of consumers in its probate and bereavement process.

Principle 11 obliges every firm to be open and co-operative with its regulator and tetll it anything relating to the firm of which that regulator would reasonably expect notice. Santander seems not to have been open with the FCA between November 2013 and May 2015 because, the decision notice says, it failed to give the FCA information relating to the "deceased customer accounts issue" of which the regulator would have reasonably expected notice. Santander was selective in the information it provided and the FCA says that its conduct fell below the standards of openness and co-operation expected of a firm.

One telling paragraph in the decision notice outlines the way in which the FCA expects every firm to 'co-operate.'It says: "Between September 2014 and February 2015, Santander met with the authority regularly to discuss a similar issue concerning open deceased customer investment holdings within its separate investment business. It did not use these opportunities to make clear to the authority that a wider, more serious, issue existed within the banking and savings business. Santander staff made only a high-level reference to a bank-wide review of deceased customer holdings in November 2014 and the authority only discovered the nature and extent of the issue on 1 May 2015. This information was only received after the authority identified a reference to the issue in a Santander committee paper and made a direct enquiry of Santander. Such conduct is unacceptable."