Barclays blasted over 'catastrophic' theft of thousands of customer files

TheGuardian: Files containing names, addresses, medical details and NI numbers have allegedly been sold for use by scammers

Barclays is under scrutiny by regulators and could face a hefty fine after thousands of confidential customer files were stolen in a data breach described as catastrophic by an adviser to the business secretary, Vince Cable.

The files, containing details on 2,000 individuals including their names, addresses, phone numbers, passport numbers, mortgages and levels of savings, were allegedly sold for use in boiler-room scams, in which vulnerable savers are snared into fraudulent investments.

"This is catastrophic, just awful," the Liberal Democrat MP Tessa Munt, who is parliamentary private secretary to Cable and has campaigned on mis-selling by banks, told the Guardian. "What protections have Barclays got in place? Are the police going to pursue this, are they going to prosecute, and is someone going to go to jail for this? They should do."

"We are learning not to trust our banks and that is a pretty sad thing. It is a culture of just make money in any way and that probably breeds a contempt among those who are bankers towards those they are meant to serve."

Barclays said it would be writing to the customers concerned. The bank, which claims not all of the individuals named in the files were its customers, has begun an immediate internal inquiry and reported the theft to the police and to regulators.

The Financial Conduct Authority (FCA), which can impose unlimited fines, and the information commissioner, who oversees data protection and can fine organisations up to £500,000, are looking into the matter.

"Barclays have contacted us and we will be working with them to understand exactly what has happened and what steps consumers may need to take," a spokeswoman for the FCA said.

"Consumers rightly presume their data is safe with their bank, and this should serve to remind all firms how important it is they have the correct procedures in place to ensure data is secure and used appropriately. We will continue to investigate the issue with Barclays over the coming days."

The security breach was first reported by the Mail on Sunday, which was approached by a whistleblower who claimed the files were just a sample from a haul of stolen data containing the details of 27,000 individuals. The whistleblower said he was prepared to give evidence to police, and claimed he was given the data to sell on by an unnamed firm of rogue brokers whom he worked with.

The memory stick he handed over also contained national insurance numbers, details on dependants and highly personal information on whether people had undergone surgery or were on medication. Those affected include doctors, scientists, business people, a musician and a cleaner.

They are believed to have been customers of the now defunct Barclays Financial Planning business, which was fined £7.7m in 2011 and ordered to pay up to £59m in compensation for mis-selling investment funds to more than 12,000 customers.

Like those Barclays customers affected by the mis-selling scandal, many of those whose names appear on the stolen files are elderly. The whistleblower said the information was used to scam about 1,000 people, who were persuaded to invest in rare earth metals that did not exist. Between December 2012 and September 2013, a select group of brokers at the firm concerned were given the files, which they used to cold call their victims.

These were customers who had originally sought financial advice from Barclays. As part of consultations with advisers, they filled out questionnaires about their savings, physical health and revealed their attitude to risk using psychometric tests.

"The data is a gold mine for traders because it is so incredibly detailed. It gets them inside the customer's head," said the whistleblower. He added: "This illegal trade is going on all the time in the City. I want to go public to stop it getting bigger."

He described a world in which scammers worked from so-called "spank shops", renting offices and peddling products that were either fraudulent or sold at inflated prices to unsuspecting, often elderly or inexperienced investors.

With interest rates at an all-time low since the banking collapse, people have been withdrawing their money from the comparative safety of savings accounts chasing higher returns on investments. Many of them are seen as soft targets for rogue brokers.

When investors of the firm concerned began to suspect they had been duped, the trading floor was shut. According to the whistleblower, computers were wiped, paperwork destroyed, and the desks cleaned with bleach to remove DNA traces. The whistleblower, a former commodities trader, was asked to sell on the data, which he said could fetch up to £50 a file from those operating boiler room scams.

Barclays said: "Our initial investigations suggest this is isolated to customers linked to our Barclays Financial Planning business, which we ceased operating as a service in 2011. Based on what we have seen, this appears to be data from 2008 or earlier.

"This appears to be criminal action and we will co-operate with the authorities on pursuing the perpetrator.

"We would like to reassure all of our customers that we have taken every practical measure to ensure that personal and financial details remain as safe and secure as possible."

The Information Commissioner's Office, which can fine organisations up to £500,000 for failing to protect private data, said in a statement: "It's crucial that people's personal information is properly looked after. We will be working with the Mail on Sunday this week to get further details of what has happened here, as well as working with the police."

Controversy over City bonuses will be reignited this week when Barclaysadmits it paid its staff more than last year, fuelling predictions that the amount of bonuses paid out across the Square Mile since the 2008 crisis could soon hit £80bn.

Barclays is expected to reveal on Tuesday that its bonus pot topped £2bn last year – more than it paid out in the previous 12 months – despite a pledge by its boss Antony Jenkins to show restraint on pay.

Starting the reporting season for the high-street banks, Barclays will be followed in the coming fortnight by bailed-out banks Lloyds Banking Group and Royal Bank of Scotland, as well as HSBC, in disclosing how much each has paid in bonuses for 2013.

The payouts will come on top of the £67bn that the Robin Hood tax campaigners calculate has been paid since the onset of the financial crisis.

Bonus payments in billions of pounds

If the 2013 bonuses match the average of £13.5bn paid each year, the total will top £80bn by the end of 2014.

This is more than £1,000 for every man, woman and child in the UK and three times the £20bn of revenue HMRC collected from the banks in corporation tax, the bank levy and the bonus tax combined during the same period, according to the campaigners for a tax on financial transactions.

The Robin Hood tax campaign said: "This level of handout in the state-supported financial sector is a national scandal. As the rest of us live through austerity, the City's age of affluence carries on regardless.

"This year's bonus season is set to be another stark reminder of just how obscene bankers' pay packets have become."

According to calculations by the campaigners the bonuses being paid out could reverse all the £11.5bn additional public spending cuts announced at the 2013 spending review, or eliminate 10% of the 2012-2013 budgetary deficit, or pay for the disability living allowance with enough left over to scrap the bedroom tax.

This year's payouts will be the last before the European Union enforces a cap, limiting bonuses to 100% of salaries or 200% if shareholders give their support. Most banks are expected to ask their investors to back the higher proportion, including 81% taxpayer-owned RBS, and also to find ways to protect high earnings by devising third payments which count as neither salary nor bonuses.

Barclays has starting telling those staff affected by the bonus cap – the most senior staff likely to be earning more than €750,000 (£622,000) – that they will receive a monthly role-based allowance.

"The UK government should stop cosying up to their friends in the City and stem the problem at source by ensuring the Square Mile pays more in tax. Current levies simply aren't doing the job," the Robin Hood tax campaign said. which It argues a levy on financial transactions would bring in £30bn a year for the 11 nations about to introduce it in Europe. In the UK, which is not introducing the levy, it would raise as much as £20bn, campaigners say.

In December the Corporation of London, the local authority for the financial district, said the financial services industry had contributed £65bn of tax in the 2012-13 financial year and that 1.1 million worked in the sector – nearly 4% of the total UK workforce.

Barclays' 2013 profits are forecast at £5.4bn, down on a year ago when Jenkins set out his "transform" plan to pull out of businesses that risked damaging its reputation and axe 3,700 jobs. This year further job losses are expected as the bank adopts new technology and cuts back its investment bank following last year's £5.8bn cash call. It may also extend its plans to shrink the size of its investment bank; it has already pledged to cut its balance sheet by between £65bn and £80bn.

Jenkins also said last year that he would set out eight commitments for the bank which would not necessarily be based on financial targets.

His counterpart at Lloyds Banking Group, António Horta-Osório, has also begun to make pledges intended to "help Britain prosper". On Thursday, when the bank reports its 2013 results, he will set out the case for privatisation of the government's remaining 33% stake in the bank after he received a £2.3m bonus on the back of the rise in share price last year. Last week he had to admit the bank's provision for payment protection insurance was rising again, to almost £10bn.

Banking standards will also be in the spotlight this week when Sir Richard Lambert, former director-general of the CBI, releases his draft report into banking ethics and standards.

Jill Treanor,Juliette Garside