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Last Updated: Monday, 26 November 2007, 08:47 GMT
Darling told to pay fraud costs
By Paul Lewis
BBC Radio 4's Money Box

Alistair Darling
The Chancellor is under pressure from the banks
A row has broken out between the government and the banks over who will pay the cost of any fraud after 25 million child benefit records were lost.

Both the chancellor and the prime minister told MPs the banks would repay customers who lost money.

But in a letter the banks have told the chancellor that he should reimburse them for the cost.

So far the Treasury has yet to respond to the banks.

The letter is signed by the British Bankers' Association, the Building Societies Association and the Payment Service APACS which is responsible for security of money transfers.


It warns the chancellor that they will refund their customers initially but, if there is widespread theft due to the blunder by the Revenue, the banks will look to the government for recompense.

Speaking on Radio 4's Money Box programme Sandra Quinn of APACS said: "Under the Banking Code we protect customers. And customers need to know that they have one point of contact if they're concerned and that is their bank or building society.

"But there is a separate issue about long-term liability. And if there is evidence that the loss of this data does lead to widespread fraud we will want to pick this up with the Chancellor and the Revenue. They won't be surprised by that."

Sandra Quinn also told the programme that APACS and the banks did not hear about the data loss until Friday 16 November, more than four weeks after the disc was sent and more than three weeks after a senior Revenue official became aware of the loss.

"We'd have liked to have known earlier because the earlier we knew the sooner we could take steps," she said.

No guarantee

And, despite assurances by the chancellor that all the 7.3 million bank accounts affected would be "flagged" so they could be monitored for "irregular activity", Sandra Quinn said that could not be guaranteed.

"Obviously this is a massive issue we can't guarantee that every account will be flagged. But there is no evidence that this data is in criminal hands."

She said every bank and building society had been told which of their accounts was affected and would sample accounts to monitor activity for any signs of fraud. But she added that individuals should also check their bank statements carefully themselves.

BBC Radio 4's Money Box was broadcast on Saturday, 24 November 2007 at 1204 GMT.

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