Banks call for more collaboration outside industry to combat transfer scams

Banks will be able to refund victims of bank transfer fraud themselves rather than out of an interim shared pot of cash, a trade association has said.

UK Finance said the central pot had originally been set up in the hope that a long-term solution, also involving online platforms, would be set up to contribute to customer reimbursement – but this had not yet happened.

Scams often originate outside the banking industry. Some arise from information gained through firms’ data breaches, which can be used to make frauds appear more convincing, or from fake online adverts for products such as investments.

Banking giant Lloyds said there needs to be as much focus on scam prevention as reimbursement.

Katy Worobec, managing director of economic crime at UK Finance, said: “The interim funding pot was originally set up because we had asked that Government and regulators work with industry to find a long-term solution to funding of ‘no blame’ cases, involving other sectors like online platforms, which are used by criminals to perpetrate the fraud, contributing to reimbursing the customer. Sadly, that is yet to happen.”

UK Finance said the change outlined on Friday will simplify the process for banks who have signed up to a voluntary industry code which reimburses people who are tricked into transferring money directly to a fraudster.

It said the change will not impact customer reimbursement and the new process only applies to banks which are part of the voluntary code.

The authorised push payment (APP) scams code was set up to reimburse people in situations where neither they, nor their bank is to blame.

However, there have been concerns that not all banks are interpreting the code in the same way and in some situations scam victims are being assumed by banks to have sophisticated financial knowledge.

APP “no blame” scam cases have been funded through an interim arrangement, where seven banks and building societies provide funding into a central pot. Banks have been directly refunding customers in such cases, and then claiming the money back from the pot.

UK Finance said multiple lockdown restrictions have meant a shift in the way people live their daily lives, with people doing more activities online.

It said criminals have adapted scams to mirror these shifts, harnessing tech platforms to prey on victims.

Vim Maru, group director, retail bank, Lloyds Banking Group, said: “When the central funding arrangement was first put in place, it was expected that those organisations in the wider ecosystem would also contribute.

“As this has not happened, the arrangement is no longer needed. Protecting our customers from fraud remains our priority and we are committed to reimbursing victims of scams in line with the voluntary code.

“Identifying and preventing fraud requires the combined efforts of every sector.

“It is disappointing that many organisations outside financial services have been slow to adopt measures designed to stop fraud, given the fact that scams often originate outside banking and we know this influences where fraudsters operate.

“There needs to be as much focus on prevention as there currently is on reimbursement, starting with the inclusion of financial fraud in the forthcoming Online Safety Bill.”

UK Finance said the banking and finance industry is investing millions in advanced technology to protect customers from fraud while working closely with Government, law enforcement and sectors such as telecoms to stop the criminal gangs.

But it said a more comprehensive approach – which includes the tech and online sectors – is still urgently needed.

UK Finance said economic crime should be included in the scope of the Online Safety Bill.

Detective Chief Inspector Gary Robinson, head of unit at the Dedicated Card and Payment Crime Unit (DCPCU), said: “We would welcome opportunities to partner more closely with the online platforms.

“Recent collaborations with social media and telecommunications companies enabled the DCPCU to successfully take down 731 social media accounts linked to fraudulent activity, of which 258 were involved in recruiting money mules.

“Everyone should play their part in helping tackle fraud, including members of the public who are reminded to protect themselves by taking a moment to stop and think before parting with their money or information. Contact your bank immediately if you think you’ve fallen for a scam.”

Gareth Shaw, Which? head of money, said: “Bank transfer scam reimbursement rates for some firms are appallingly low, so it’s important that any changes to the funding arrangement result in these figures improving, not declining further.

“This move should also prompt banks to improve their security measures and anti-fraud warnings, which have been found in some cases to be ineffective at preventing crimes that can lead to people losing life changing sums of money.

“Ultimately, much stronger improvements are required to ensure that victims of this type of fraud are treated justly.

“The regulator must work with the Government to establish mandatory standards of consumer protection for all banks and payment providers, with strong enforcement to ensure that people are treated fairly and consistently when trying to reclaim their losses.”