This is my submission to the Williams Inquiry. I had decided not to participate (as if I had anything of importance to say anyway) until such time as it had been made statutory and the remit widened. Well the remit may not yet be as wide as many want but I hope by leading Sir Wyn into areas that need investigating he himself will ensure what needs to be covered is.
The Inquiry shall:
A: Understand and acknowledge what went wrong in relation to Horizon, leading to the civil proceedings in Bates and others v Post Office Limited and the quashing of criminal convictions, by drawing from the judgments of Mr Justice Fraser in Bates and others, the judgments of the Court of Appeal (Criminal Division) in R v Hamilton and others, other judgments in which convictions have been quashed, affected postmasters’ experiences and any other relevant evidence in order to identify what key lessons must be learned for the future.
This important part of the inquiry’s remit is badly worded. It talks of looking at the past in order to build a better future. What needs to be done is to look at the present and understand the key and very basic principles that have never been addressed.
When an error in the accounts of a Post Office branch occurs this is referred to as a discrepancy. All the focus of the scandal has been on those discrepancies that caused Post Office Ltd to seek recovery of cash from subpostmasters. What is so glaring in its omission from the investigation into the scandal is the fact that discrepancies work two ways. They can either be in favour of POL or in favour of the SPMR. The disputed term of the contracts is that the SPMR is responsible for all losses and gains in his branch however they have occurred. Gains may be removed from the branch accounts in cash by the SPMR without any need whatsoever for the SPMR to ascertain the cause. This leads to the inescapable conclusion that many computer system errors may have gone unnoticed because of the lack of incentive to investigate and report on gains. It also provides an avenue for fraud within POL to go unnoticed if carried out in conjunction with SPMR associates but that is for others to investigate. There are however known instances of Transaction Corrections being allocated to wrong offices and where these represent a gain to the SPMR then there is no incentive for the SPMR to report the mistake.
Discrepancies happen through error or criminal intent. The default now for shortfalls is that computer error is to blame thanks to the decision of Fraser J. Then it would be by manual error. Proving criminal intent is now impossible (and frankly it always was) because of the lack of supporting evidence to prove that either computer or manual error was to blame. The ONLY feasible supporting evidence that could be used is that of CCTV and it is frankly beyond belief that POL have never insisted on this at all of their branches. Imagine walking into a bank and seeing no CCTV cameras? The reason they are not there in POL branches is precisely because of the now revealed method of investigating branch shortfalls and POLs flawed use of litigation to recover them. The Fraser J. decisions are now nearly 2 years old and despite identifying this weakness to POL, not only from me but also others, they have refused to initiate CCTV coverage.
This suggests to me a lack of serious intent to ever bring charges against SPMRs again even in the face of almost certain evidence of fraud. That in itself, if it became widely known, carries a major risk of incentive for fraudulent activity.
Dealing with discrepancies
By far the most common reason for a discrepancy to occur in branch accounts is by user error. Whatever the reason though these, by in large, only become apparent at the end of the day when a value stock declaration is made i.e. when all stamps and currency are counted and compared against the record of Horizon. Counting this at the end of the day, when you are physically tired and mentally exhausted is in itself a cause for many discrepancies. Investigating the reason for the discrepancy is time consuming and only adds to the weariness of the SPMR. As a result complacency sets in and decisions to investigate are based on the amount of the discrepancy and whether or not it is a gain or a loss. POL’s historical ‘solution’ to this was to suggest an ‘overs and unders’ tin in the safe where gains removed in cash by the SPMR were placed to cover subsequent losses. This method remains in practice for many but in reality it removes the possibility of establishing the causes of minor handling errors or even smaller computer errors that over time may accumulate into serious losses. The overs and unders tin has a serious impact on the ability to track timelines of faults and distinguish between what may be several different reasons.
Offering a solution to this particular problem is easy. It is hard to imagine for instance that a High St Bank operates the same method and in acknowledging that, the ‘overs and unders’ tin becomes a good example of one part of POLs business model that is completely inadequate.
I believe all of the recently successful appellants reported rising discrepancies over lengthy time periods. It is almost laughable if it wasn’t so serious to suggest that they were thieves in the first instance when the obvious analogy is a bank robber waiting in the bank he has just robbed for the police to show up. All Post Offices are sold on eventually and at that stage the value stock is counted by what POL refer to as ‘Auditors’ who are in reality little more than bean counters. It is an astonishing reflection of POL’s business model that an SPMR may only be ‘audited’ twice in the course of their association with POL which in some cases could be 10 years or more; once 6 months after taking office and as mentioned above when the business is eventually sold. I have bought and sold 2 post offices and I can personally attest to that with the first being in my hands for 6 years.
In every financial institution I have worked in it has been a regulatory requirement that you are absent from your desk for a contiguous period of two weeks for obvious reasons whether you are suspected of fraud or not. Throw in a mandatory maximum period between routine but random ‘bean counting’ (I hate to refer to these people as auditors) by independent appointees then the temptation to cover growing discrepancies is removed. Again a significant weakness in the business model put down no doubt to the cost of doing so. That cannot be a reason to exclude such checks because if the cost of doing so makes you unprofitable then you do not have a viable business.
In addition, under this heading as an addendum, there seems to be a belief among POL Staff and even many Subpostmasters that computer errors are easily spotted, will always be of significantly large amounts and, as I have mentioned previously, always in the favour of POL. Tatford QC, prosecuting on behalf of POL in the Misra trial repeatedly presented these assumptions to the Jury and even the Judge seemed to be persuaded that computer errors would always be spotted by the operator because they were so obvious. This is not the case. Computer errors occur and the effects that materialise as a result are not limited by amount or allocation. They could be for a penny or several thousand pounds, in favour of POL or in favour of the SPMR and they do not always occur only once.
I once brought the attention of POL to a relatively minor computer error that generated penny losses and gains on a regular basis. To their credit Fujitsu took this relatively seriously and worked with me to discover what was causing it. I was never told how they thought they fixed it but it reappeared in discussion on social media years after I had left the business and if it remained in the system for so long then over time those pennies could have accumulated into a significant amount. It is also interesting to note that this error was not highlighted in the GLO trial nor another computer error that I will discuss later in this document. These are just two instances that show that POL and Fujitsu’s insistence that all known errors were exposed in the GLO is false.
Finding the cause of discrepancies
I have been too long out of the business to comment on current practice and available reporting tools but I can say what was offered to me in both legacy Horizon and HOL was totally inadequate. Through social media I can observe the same problem occurring and the indecipherable transaction log being queried on Facebook pages as to what certain acronyms mean. What I can suggest is that the Inquiry recommends an independent review of the adequacy of proposed data reporting tools in the new version of Horizon yet to be released.
Errors in Horizon
In subsequent submissions to the appeal court and in public statements, POL seem to be saying that the GLO resulted in the disclosure of all errors that there ever had been in Horizon (whichever version). That is deceitful and suggests that even after the findings of the court POL are still trying to defend the reliability and robustness of the system then and now. Levels of reliability and robustness are based on subjective comparisons and they can never be relied upon to defend the reputation of an organisation such as POL. What POL need to rely on is the effectiveness of how they deal with system errors when they appear and probably just as importantly how they discount system errors as being the cause of problems.
The existence of the Known Errors Log was first highlighted during the Misra trial in 2010. It is absolutely standard procedure in all computer systems to maintain such a record but it is the name that leads to a fairly obvious conclusion that all errors in that log were at one time unknown. In the GLO the only errors that could be investigated by the plaintiffs were those recorded in that log and it is beyond reasonable doubt that at any given time there are unknown errors yet to be discovered. That is why it is so crucial to have procedures in place, including CCTV evidence, to be able to remove the possibility of an unknown bug being the source of a discrepancy in the branch accounts.
This may not be under the right heading but it follows from the above. The GLO, as in any trial, was time limited and there were many aspects of the litigation that were not argued before the court. One of these was the procedures followed by Fujitsu and POL in correcting errors once they had been identified. There is plenty of documentary evidence of attempts by POL to locate and rectify errors in other branches once the errors had been brought to their attention but I would highlight one particular example to show that in some cases no effort at all was made to do so.
The bug that was first identified at the Callender Square branch was down to a hardware problem that manifested itself as a series of multiple failures to write to a hard disk and these failures would be recorded in the NT Log file for the workstation on which they occurred. On the first day of the Misra trial the Fujitsu expert Gareth Jenkins brought to court the NT log files of the workstations at Seema’s branch to show that the Callendar Square bug had not occurred there. He didn’t bring a copy of a report showing that Fujitsu had checked the records of ALL workstations in the whole network to prove that the error had not occurred elsewhere before they found out about it. The cost to Fujitsu to carry out such a task would have been horrendous but that cannot be an excuse for not attempting to do so. As it turns out the Callendar Sq bug did occur at other branches as did the other famous bug known as the Dalmellington Bug. In the latter case it seemed to me that POL only looked into the effect of that bug on other branches ONLY as a result of the GLO and I have proof that even after Fujitsu said they had fixed it POL were pursuing a SPMR for significant losses incurred as a result of it having occurred at the SPMRs branch. In the former, POL were aware that it had occurred elsewhere only because of it being reported by SPMRs.
This inquiry must find out what procedures are now in place to deal with errors when they are found and how POL check to see if they have occurred at other branches.
The Dalmellington bug on its own requires separate analysis. I have some supplementary evidence that shows the role Fujitsu, ATOS and POL played in that was alarming to say the least and I would be happy to share that your specialist IT consultants. It would be extremely useful to obtain additional disclosure on it in relation to the ‘fix’ that was applied because I believe it would shed light on many generic system problems not least of which is cost related.
Summary of Conclusions
- CCTV must be installed in all Post Office Branches under the control of POL. These not only provide evidence of causes of discrepancies but also act as a deterrent to fraud.
- An independent investigation into the back office practices of POL is required to highlight the potential for fraud
- The practice of using an ‘overs and unders’ tin must be discontinued. A study into an alternative must be commissioned looking at best practices in similar organisations
- Discrepancies that result in gains to the SPMR must be identified and investigated. Changes to contracts recognising this must be considered
- Mandatory random audits within a set time limit (perhaps 2 per year) are required
- ALL discrepancies are worthy of investigation and a database of common causes must be established and available to all SPMRs
- Current methods and procedures used by POL to investigate unaccountable discrepancies should be put to the test within the timescale of this review. A suitable Post Office branch, with or without full CCTV coverage, should be selected and a discrepancy manually created. A monitoring team should observe the actions of POL staff as they try to determine the cause of the error. At the very least this would serve as a baseline for future changes to processes actioned by the findings of the Inquiry
- The Inquiry needs to investigate and report on the steps taken by Fujitsu and POL to ensure that the effects of computer errors when they become known are checked against the whole network to ensure that they have not occurred previously and not been spotted
- The Dalmellington bug requires further investigation including full disclosure and evidence sought from SPMRs affected by it. I would provide further detail for this item if required.
B: Build upon the findings of Mr Justice Fraser and the judgments of the criminal courts specified in A above by obtaining all available relevant evidence from Post Office Ltd, Fujitsu, BEIS and UKGI to establish a clear account of 1) the implementation and failings of Horizon over its lifecycle and 2) Post Office Ltd’s use of information from Horizon when taking action against persons alleged to be responsible for shortfalls.
I would like to redefine this form of words to encompass the most recent and hopefully final, findings of the Appeal Court. Up until the 23rd of April 2021, Post Office Ltd were taking action against persons alleged to be responsible for shortfalls, and up until that date were still relying on construed facts linked to Horizon.
POL were taking action by appealing to the court not to find for Category 2 abuse of process against the appellants. This despite the revelation in November and only through a remarkable disclosure request of the Clarke Advices. If they had not fought against the G2 that was recommended to the court by the CCRC in their Statement of Reasons, then the 39 appellants would have had their appeals held and settled in November thus prolonging the suffering of the successful appellants by 5 months.
The question that needs to be answered, under oath, is why they believed that their actions in bringing Malicious Prosecutions against the appellants were not an affront to the public conscience AFTER the Clarke Advices had been disclosed. It is surely self evident that it was the financial consequences of losing the argument in court that drove them not to concede earlier. The barrister Paul Marshall who represented 3 appellants can provide better background to this than I but a recent FOI request to POL shows that the Clarke Advices were discussed at board level in the interim period between their public disclosure and the decision hearing in April. This surely implicates the current board of POL in a decision making process based not on the suffering of those that POL inflicted it on but on the prospect of limiting the financial impact of their historical failings.
This also highlights the unbelievable failings of the legal teams POL have appointed over the years to provide them with advice and it may be for their regulatory bodies to open a separate inquiry into the utter shambles of their performance.
I would also recommend that your inquiry looks at recent FOI requests placed through the WhatDoTheKnow website calling for publication of communications between Paula Vennells and BEIS around the time that the Clarke Advices were provided to POL. This also includes responses to Ministerial questions on the same subject asked by Kevan Jones MP. If ever there was evidence of a cover up to be found it will be there.
With regard to the Dalmellington bug, which I hope I will be asked to provide supplementary evidence for, you should ask Calum Greenhow of the NFSP for details of the SPMR who he was helping because he was being chased for repayment of a discrepancy clearly related to the Dalmellington bug some 6 months AFTER Fujitsu said they had fixed it. Despite many requests both in private and publicly on social media he has refused to provide me with those details despite asking me for assistance in the first place which is how I came to know about it.
C: Assess whether Post Office Ltd has learned the lessons from the criticisms made by Mr Justice Fraser in his judgments following the ‘Common Issues’ and ‘Horizon Issues’ trials and those identified by affected postmasters and has delivered or made good progress on the organisational and cultural changes necessary to ensure a similar case does not happen in the future.
By the time the final report from this inquiry is published in 2022 there is an opportunity for POL to progress the changes they are currently making to address some of the issues raised by Mr Justice Fraser as well as the historical issues raised by others including myself. However the changes they have made so far and the future changes to be made that I am aware of including replacement of the current Horizon system indicate that they are wilfully ignoring the most obvious failings in a business model that is not and never has been fit for purpose.
It is not just the criticisms of Justice Fraser in his two decisions that need to be taken into account, it is also his findings of fact and one of the most important is that the contract between SPMRs and POL is a relational one, implying good faith between the parties. I would say that it is predominantly the effect of the long standing culture in POL of ‘them and us’ that makes POL blind to making the changes necessary in the contracts to reflect the relational aspect of them and not leave it as an implied condition that would take vast legal resources from individual SPMRs to challenge POL on. However if it came to the crunch, a group of SPMRs could certainly get together and invoke yet another High Court challenge based on the fact the POL have not adapted the terms of their contracts and are ignoring the concept of good faith.
The best example of this has been going on for 10 years now ever since the inception of the Network Transformation project and it has not changed at all since the Common Issues trial, in fact it has got decidedly worse recently. This is what POL describe as White Space opportunities, where opportunities to open a new Post Office outlet are offered in mainly urban areas regardless of whether those areas are already being served by Post Offices. In many respects this policy is now anachronistic as it was inspired by the conditions of the EU State Aid regulator who laid down that POL must maintain a network of 11,500 outlets in order to be allowed to receive state aid from the Government. If you look at the ‘numbers’ in the network since 2010 you will see a very ‘stable’ size of approx 11,500 which does not reflect what actually happened over the years.
POL have gone over and beyond the call of duty to protect this number at all costs. Opening new Post Offices regardless of the financial impact on existing offices close by. To be fair, in 2011, before the real impact of NT started to hit, POL had a Geographical Information System in place (I forget the name) to identify areas of population growth that required additional POs. They probably still have something similar but the underlying rationale of ensuring the USO obligations are met has long replaced any demographical need.
More recently POL announced that the 10,000 or so Payzone outlets that they recently obtained, will be given hand held devices that will allow them to offer basic postage services as well as bill payments. That is not a surprise. It was always the intention of Paula Vennells to do this and from a business perspective it was demanded of her by RMG. Interestingly I think, I know this because for many years I was being provided Executive Committee Minutes of the NFSP by a whistleblower and the infamous 25,000 ‘basic’ sites was kept secret from their members until Vennells expressed the desire publicly some years later.
So the problem is that SPMRs can invest and purchase a PO, based on a business plan that they must get approval from POL for showing expected income over a number of years and a few months later POL themselves can blow this expected income out of the water by approving a new White Space opening almost next door. This is not just a possibility it is happening now and getting worse.
I doubt you will find any Franchise offering in the World that does not include in its contract some form of demographic protection providing at the very least compensation for encroachment. In POL’s case there never has been any written obligation to provide this in the contracts but from the date of the Common Issues decision it is now an implied term (although not tested in court and not raised specifically by Fraser J.)
SPMRs remain oblivious to this problem until such time as a White Space outlet opens next door. They can complain all they want but POL ignore them. This needs to change now. Demographic Protection must be clearly written into all contracts and not left as an implied term. In fact a closer look at the implications of the relational contract decision should be undertaken to ensure that all implied terms whether decided by Fraser J are written into the contract when they can be defined.
It says much of the past and current NFSP Organisation that they have, and continue to, fail the SPMRs they represent by not insisting on Demographic Protection. I certainly brought it to George Thomson’s attention at the start of NT in 2010.
This is but one example of POL completely ignoring the findings of Justice Fraser and there are more but it serves to highlight what has caused this and what still needs to be done. It should be a finding of this inquiry that at present there remains a distinct possibility that court action could raise its ugly head again precisely because POL have failed to act on the findings of Justice Fraser.
I would recommend setting up an independent panel that specifically excludes POL and NFSP to look at what changes need to be made to the current contracts based on the relational aspect and the implied conditions that that imposes. (in a separate submission I will come back to that with respect to ‘gains and losses’)
POL Culture and Organisational Changes
From an independent viewpoint, from someone who has served as a subpostmaster and one who wants the network to flourish and survive it is so obvious how the ‘Them and Us’ relationship has developed over the years. POL has always been and remains part of the establishment. A bureaucracy driven by personal achievement rather than commercial incentive unchallenged by independent stakeholders seeking a return on their investment. Directors appointed on a quango basis and staff promoted from within with little regard to ability and aptitude. While I welcome the appointment of the 2 new SPMR directors to the board, all you need to do is look at the makeup of POL employees to see that few former SPMRs are in POL’s employ and none are in senior management positions (although it has been pointed out to me that several former NFSP Execs have been given roles and I really don’t need to comment on how that came about).
In my blog I have written many times about the unaccountability of POL over the years. The best example is the £2 Billion given to them for the NT project which has never been audited. I wrote to the NAO asking if they would look at it and they said it was not part of their remit despite having audited various RMG projects before POL separated from them. I asked to see the report that POL had to lay before parliament prepared by external auditors and for all intent and purposes it could have been written on the back of a fag packet. Over the years I have highlighted inconsistencies in their financial reports yet no one is interested. I even went to the lengths of finding out how many copies of their glossy annual report were printed and distributed – 150 I recall for some 1000 or so parliamentarians whose duty it is is to monitor how public money is spent. Unaccountability breeds an incestuous culture within any organisation where failure is rewarded and achievements are not required.
With such a culture still in place could POL really attract institutional investment? I doubt they could survive if they were put in a position to rely on it.
Changing the culture I think now needs a dramatic intervention. We have the top down changes in place and I believe Nick Read has put together a good team at executive management level but they have been in place too long without addressing this problem and the longer they are part of the culture the more they will adapt to it personally.
Bottom up changes need to be made. I believe one of the best ways to achieve this (and I have already suggested this to Nick Read) is that a career path for SPMRs within POL be established with the potential for each SPMR to be promoted through local and regional levels to senior management and beyond. This needs to be backed up by a good HR policy to oversee promotion based on aptitude and ability and not an old boys club mentality.
D: Assess whether the commitments made by Post Office Ltd within the mediation settlement – including the historical shortfall scheme – have been properly delivered.
E: Assess whether the processes and information provided by Post Office Ltd to postmasters are sufficient:
i. to enable both parties to meet their contractual obligations
ii. to enable postmasters to run their businesses. This includes assessing whether Post Office Ltd’s related processes such as recording and resolving postmaster queries, dispute handling, suspension and termination are fit for purpose. In addition, determine whether the quality of the service offer for postmasters and their relationship with Post Office Ltd has materially improved since the conclusions reached by Mr Justice Fraser.
As I have been out of the business for some years I cannot comment on what is now in place. However I can point out what is not.
There is no Service Level Agreement in place to cover SPMR losses following Horizon outages or equipment malfunction. POL will have such agreements with their suppliers and the compensation that flows from them should roll down to branch level. There must be an automated process for feedback to SPMRs on the status of service calls and an automatic escalation process.
POL have never provided warranty for the equipment and software they supply to the SPMRs. It may also be a key point in examining the contract between POL and Fujitsu to identify the consequences of any Limitation of Liability clauses which have prevented POL pursuing Fujitsu on behalf of the claimants as well as themselves.
From an historic perspective, at the time I informed Paula Vennells of the label printing bug in the system, I managed to have confirmed during a call with Angela van den Bogerd that there was no system in place for call centre operators to categorise calls that would allow analysis of call reports to identify common features. As I had personally written such a system for Texaco in the early nineties it was quite a shock to discover the lack of such a system in POL 20 years later. I would like to see SPMRs have direct access to such a system to allow them to record errors and service calls themselves without going through a process of subjective Q&As from call centre operatives with varied ability and experience. This would certainly ease pressure on the ‘Hell Line’ queues. In addition by using drop down lists, interpretation of English problems would be assisted.
The Known Errors Log
At some stage after the GLO completed I was given personal assurances that the network would be provided with a regular update on known errors in the system, advice on how to handle them and information on when these would be fixed. They seemed to start doing that then it fell away. Of course that could be to do with the possibility that no new errors have been identified but I would like to see a monthly statement from POL informing the network of the error status even if there are none to report.
In addition access to summary reports from the call centre monitoring system should be available to all as a knowledge base of problems and how to resolve them.
There is absolutely no doubt that the rise of Social Media during the years leading up to the GLO played a big part in assisting SPMRs to find out that they were not alone. Observers of such channels such as myself often were able to identify similar bugs or errors in the system that went unchecked by POL. The Label Bug was one such instance and I recall running a Poll on what is I think the largest PO Group on Facebook to find out if the error had been observed in other branches and got something like 70% positive feedback (I can’t remember the actual percentage)
It might be of interest, although of little significance now, to note how the NFSP tried to control dialogue on their own forum. When legitimate concerns were raised over the Network Transformation project for instance, I happened to publish on that forum the proposed Transaction Rates for the new Mains Offices. That information was not made available to SPMRs prior to asking them for approval for the NFSP to support NT and had it been it would have revealed that many of the new Mains offices would have suffered a loss in their income as a result. Within an hour of my publishing that information the NFSP forum was closed down and I was later banned from using it.
F: Examine the historic and current governance and whistleblowing controls in place at Post Office Ltd, identify any relevant failings, and establish whether current controls are now sufficient to ensure that failing leading to the issues covered by this Inquiry do not happen again.
As it happens I recently received an email from POL whistleblowing department asking me to expand on a comment I had made to Nick Read. The email was crudely written, rude and suggested arrogance. With an attitude like that they are not going to entice many to step forward.
Limitations of your remit
From the outset of Alan Bate’s proposed litigation (prior to the GLO and including the mediation scheme in 2015) POL have sought, and succeeded to limit any investigation and disclosure to the Horizon computer system. They do not fight so hard to achieve that without reasons and those reasons need to be identified.
The whole procedure surrounding the operation of ATMs has certainly led to accounting shortfalls in branches. It is a ludicrously complicated system involving multiple third parties over the years and requires a thorough investigation.
It is well documented that suspense accounts in POL back office systems contain amounts that can never be allocated and eventually are cleared to the P&L. For instance in 2000/1 I have seen contemporaneous emails stating that there was approximately £6m sitting in branch suspense accounts following the introduction of Horizon and that POL were asking their regional managers to get SPMRs to repay at least half of this amount. What may be of interest is that several years ago I looked into the audited accounts of several large county councils and saw that even they had large amounts recorded in suspense accounts which were explained mostly as being incorrect allocation of bill payments many of which would have been received by Horizon.
As recently as 2019, there were a spate of reports on Social Media with regard to errors with Cash and Stamp Deliveries to offices, something I raised at the time with Al Cameron who was acting CEO. The sizes of some of the discrepancies were particularly alarming. One instance I recall was a SPMR receiving £10k more than he was asked to sign for (i.e. a gain that by contract he was entitled to keep). Errors emanating from Cash Centres have been spotted many times over the years including sealed bags of £1 coins that should have 20 but often one more or one less. In one instance I received £100 short out of what should have been a total of £2000 in notes. I have written about this in my blog but the long and the short of it was that I was asked to make up the difference by POL and in return POL were asked by me to come and collect their belongings. For some strange reason they decided to cover the shortage themselves.
Counterfeit Note Handling
There are some great examples of the anachronistic methods and procedures still in use by POL today. None more so than the handling of counterfeit notes not spotted by branch staff and returned to Cash Centres. When this happens a Transaction correction is sent to the branch for the amount of the note and a letter informs the branch that if they want to query it then they must attend the Cash Centre to witness the CCTV footage that proves the note was counterfeit. Given that a) Cash Centres are often hundreds of miles away (imagine Stornoway to Glasgow b) the Cash Centre often sends out counterfeit notes themselves, c) POL via the NFSP have recommended and subsidised note counting machines designed to identify counterfeits and d) this is the year of Zoom calls, it is an absurd practice.
The Labels Error
I have suggested that I provide this evidence separately to your IT consultants working on the inquiry.
I have a multitude of email correspondence with POL, NAO, Police and politicians over the years some of which may be of interest. I am happy to respond to any request for disclosure of these.