Who should be liable for the monies being scammed out of bank accounts using faster payments? (Authorised Push Payment Fraud: APP Fraud)

v Money scammed from bank accounts 2018 to 2021:       £1,840 million

v Money reimbursed to bank clients from 2018 to 2021:    £   660 million

v Money lost to scammers: £1,180 million who reported the scam

v Estimated additional 40% do not report scams as there is no justice

v Justice could see £300 million/year returned by the scammers’ banks

Over the next 2-3 years, over 500,000 people will be scammed £1 billion

The banks and the scammers should be held accountable and liable except where bank client has shown ‘gross negligence’ or involvement in the scam.

Criminals and scammers are using Bank Accounts and both they and the supporting bank should be held to account for the injustice. The FCA through the use of existing Know Your Customer (KYC) and anti-money laundering (AML) regulations are aimed at the criminal. In the pre-digital environment allowing criminals and their mules’ to engage in a crime requiring bank accounts could be seen as aiding and a betting a crime.  

v The Scammer and the Scammer’s Bank (with exceptions) are Liable  

• Criminals (or their mules) require a bank account to scam

• Banks, under FCA regulator, need to Know Your Customer (KYC) and have anti money laundering (AML) procedures in place to have a banking licence

• Each Faster Payment transaction has a unique reference (FPIN) and when arriving at the scammer’s bank account the money is immediately broken down into smaller payments and sent onwards  with their own FPINs.  The bank holding the scammers bank account knows where the money came from and where it went. The bank, on receiving a scam complaint, must take action or the scams will continue. It should be mandatory for the scammer bank to block the account and reimburse the payer’s banks’ client money

• Scammers look towards the banks with the lowest fraud protection to be their customers. The mandated regulation of nine banks to use Confirmation of Payee (CoP) confirmed that: non-CoP banks are now the first choice of criminals and mules  

• Exceptions: when the liability goes to the client:

1. When the bank client (Payer) over rides Confirmation of Payee (CoP) notice ‘the new payee name is different or non existent from the bank’s records’ and makes the payment on the second or third time of being asked ‘do you want to pay?’  The banks should inform the client this looks like gross negligence and should it turn out to be a scam you are liable.   Research shows when the Payee is not the same as the Bank records up to 25% of Payers override the warnings by CoP 
2. A significant smaller number of bank clients are implicit in a scam. In The London Museum, a map shows less than 2% of the population were the criminal class, not 60% as suggested by the banks’ refunds

v Recognising new reimbursement banking practices 

As banks continue to use existing banking practises that have not fully adopted to the digital world, as the scammers have, to keep the faith in the banks to look after money, the voluntary reimbursement policy requirements should be mandated and consistent rules for all. 

In 2021, £230 million was not reimbursed for nebulous reasons (see comments by Financial Ombudsman Service). Going forward, the rules under consistent and fair reimbursement by the banks should probably be administrated by Payment System Regulator or UKPay.com.

As this would show fairness, the 40% currently not sharing their emotional distress and financial loss by not reporting scams maybe prompted to do so. This could add £90 million in extra reimbursements

v Faster Payments – The Genie is out of the Bottle

• Consumers’ clear payment choice is for money to be received in seconds
  • 3.4 billion faster payments made in 2021and 20% up on 2020
  • Need to stop the fraudulent payment at source – before the payment is made - as the volumes are such that trying to hold a particular payment is difficult and expensive

• Technology gives sub 2-second response as standard and when the money has gone – its gone

• IBANs (International Bank Account Numbers) used for International payment transactions do not check account owner’s name an old banking practise

The UK was the first with Faster Payments now being installed in over 50 countries. By getting on top of the scams, UK should become the world’s expert on fraud prevention and providing a fairer, more egalitarian justice for the scammed.