Bank transfer fraud is a complete nightmare. To say it can be life-changing is an understatement. It can ruin lives and leave people with nothing.
This type of fraud, which involves bank customers getting duped into approving payments to criminals posing as service providers (often tradespeople and solicitors), has proliferated in recent years, with scams becoming more sophisticated and harder to spot.
To give you a sense of the scale of the problem, the Consumers’ Association Which? believes almost £400m has been lost to bank transfer fraud in the past two years. And the first six months of 2018 saw £145m lost to bank transfer fraud. Of that astronomical figure, just £31m was reimbursed to victims. That is truly shocking.
A quick tap around the internet yields hundreds, if not thousands of stories of people who have been scammed out of significant sums by fraudsters running sophisticated transfer fraud scams. One man lost a third of his retirement fund after falling victim to fraudsters posing both as his bank and broadband provider. And a woman lost £6,125 in savings after being targeted by fraudsters who also ran up £17,000 of debt in her name. These are just two cases of many. And it can happen to anyone, old or young.
A victory for bank customers
Traditionally, banks have refused to foot the bill for transfer fraud, arguing that if customers “authorise” payments, they are liable for any losses that may occur from them. To emphasise their hard-line approach to this, they have even sought to rebrand the bank transfer fraud to “authorised push payment fraud”.
It’s always seemed unfair that banks are able to deny refunds to customers, who through no conscious fault of their own, have lost large sums to scammers. This issue has been raging for years now, with complaints from customers rolling in.
The big banks have pushed back against criticism of their approach to this problem, arguing that returning money stolen from customers by criminals would lead to higher charges to cover fraud insurance policies and fees on large bank transfers. They’ve also been dragging their heels on the creation of a funding mechanism to help pay for reimbursements.
Thankfully, this is now changing. From the end of May, blameless victims of bank transfer fraud will be refunded, after the biggest UK banks voluntarily agreed to pay out in so-called “no-fault” situations. This is an interim measure before a long-term funding solution can be agreed, likely by the end of 2019.
The new code requires banks, building societies and other payment providers to better protect customers from bank transfer fraud. But it’s only voluntary, which means some banks can refuse to sign up. So far, the following payment providers have confirmed their involvement:
- Lloyds Banking Group
- Metro Bank
- Royal Bank of Scotland
If your provider’s name isn't on that list, it’s worth checking with them to establish if you are protected.
How does it work?
On a practical level, bank customers who have fallen victim to transfer fraud should be reimbursed for losses that occur from 28th May 2019 by your bank, if it has not lived up to the robust standards set out in the new code. These include:
- Detecting scams through measures such as analytics and training.
- Providing customers with alerts to warn them if an unusually large payment is being made.
- Delaying payment whilst an investigation is conducted and if necessary carrying out timely reimbursement.
Banks must tell customers of their decision to reimburse them within 15 business days of the crime being reported and money should be returned without delay. If the bank feels the need to investigate further, it cannot take more than 35 business days to do so.
If you are denied reimbursement and you feel you’ve been unfairly treated, you can still go to the Financial Ombudsman Service, which resolves disputes between consumers and regulated financial companies.
Prevention is better than cure
Whilst this is welcome news, here at Shieldpay we believe that prevention is better than cure. This recent move only addresses the symptoms of fraud, not the cause. To do that and affect positive change, the banking industry needs to invest in consumer education and better payment solutions. “Confirmation of payee” technology was due to be rolled out in May 2019, but it’s been beset by delays and it could take a further 18 months to be implemented.
Regardless, this measure doesn’t go far enough to protect people making large transfers online. To do that effectively, we need to rethink the way we handle payments.
That’s exactly what we’re doing here at Shieldpay. Our platform is an instant digital escrow facility that enables secure high-value transactions between individuals and entities. It’s perfect for making large transfers – like buying a house, or a second-hand car – giving consumers and companies the peace of mind they need to get on with life without worrying about being scammed.