OPINION OF THE WEEK: UK's Post Office Scandal Is Warning For Wealth Sector

Tom Burroughes

2 April 2024

It is hard to recall a television drama in the UK or anywhere else that has prompted calls for justice in what appears to be one of the largest miscarriages of justice in the country's history. Hundreds of Post Office workers were wrongfully convicted because of faulty software. In a scandal that stretched over two decades, some postal staff were jailed; others lost homes and livelihoods. And the TV programme, Mr Bates vs the Post Office, lit a fire that is now raging. It carries lessons beyond the UK.

To recap, hundreds of self-employed workers at the state-owned Post Office were wrongly prosecuted or convicted between 1999 and 2015 for false accounting, theft, and fraud. The convictions were caused by errors in a software system that incorrectly showed money missing from accounts. The Post Office maintained for years that data from the Horizon computer accounting system, developed by Japan's Fujitsu and rolled out in 1999, was reliable, while accusing sub-postmasters of theft.

One must ask, what lessons should private bankers and wealth managers draw from this, particularly in this time of “regtech,” compliance software and other tools designed to handle know-your-client, anti-money laundering and counter-terrorism tasks?

My first thought in reading about the Post Office story is that it shows how over-confidence in technology can be lethal. Tech systems aren’t foolproof. Just as technology cannot be relied upon to guard against trouble, it cannot be used as a blanket excuse to refuse to onboard a client, for example, or "de-bank" them, either. In those cases, tech is a tool, nothing more.

Technology is now a constant topic for the wealth management industry. It's easy to understand why. Demands on bankers, advisors and other professionals have risen a lot in recent years to foil dirty money, ensure sanctions aren’t breached, and comply with a number of laws. In this market, a cluster of technology firms have offered services to help the industry weed out bad actors and sift through a mass of data. And now we have AI/machine learning – technologies that grabbed the headlines as never before last year. Firms are pouring billions into AI, and I expect that one big area of growth will be in the compliance space. There is also a general move to automate processes from CRM systems through to back-office work, portfolio management, risk controls, and more.

But as the Post Office scandal shows, faulty technology, or overconfidence in it, holds dangers unless problems are speedily corrected – with full accountability. There’s no substitute for human judgement and a large dose of common sense. Banks’ systems for spotting potential trouble aren’t a substitute for that judgement.

I cannot really predict where the Post Office story goes from here: so far, there haven’t been wholesale resignations and punishments. But whatever happens in this specific case, I am willing to bet that it has caused a few anxious moments in the wealth industry lest something similar take place.