Bank Fraud is Colossus: what can we do?

Bank Fraud was examined in clinical detail at LexisNexis ‘Trust:Live 2024 Conference. Fraud represents 49% of UK Crime. No one knows how many scammers are out there. The scale of scam messages, over 1 billion sent over the telecom networks this year, suggests a significant number of digital fraudsters. 

The Dedicated Card & Payment Crime Unit (DCPCU), UK Finance,  gave number of arrests made in 2023 as 149. Convictions are expected to take 3 to 4 years given the state of the legal process. One of the arrest’s computer was analysed and 10,000 scams sent in one pass gathering 14 responses. A potential £45,000 average fraudulent pipeline. DCPCU has 45 people including police so imagine what a larger set of resources could be achieving.

The chances of arrest are minuscule. Rewards are cash in your bank accounts without anyone seeing or knowing you. Burglary is on the decline as its too risky in terms of being caught and a third party, fence, is needed to sell the stolen goods. No wonder ‘The Times” asked the question “Is Bank Fraud a career move?”.

The good news is UK Parliament and Payment System Regulator (PSR) are mandating confirmation/verification of bank accounts owners and reimbursements to consumers/SMEs starting in October 2024. This means all banks operating in pounds need to verify the payee before the money is sent. Should a scam be committed, the Payee and Payer banks split the fraudulent payment 50%/50%. The victim pays a small fee to the bank. One of the first programs in the world protecting the bank’s customers being out of pocket from money being illegally taken out of the bank account. 

Banks have a history of postponing mandatory deadlines using the excuse of disturbance to the financial system. One speaker advocated this position. Explaining too much work is needed in too short a timeframe suggesting a  timetable to 2030.  Up to 2 million customers a year are scammed. By then 1 in 5 of the population would have experienced the emotional trauma of being conned alongside the financial loss. Let’s not prolong unsafe and insecure faster payment services.  

Another argument for delaying the mandate was the upper limit of the reimbursement being set at £415,000. As 99.7% of all scams can be covered by an upper limit of £85,000 limit. Coincidently this limit is the same as the deposit guaranteed for a bank account balance should the bank fail. The bank guarantee is an insurance policy.

Given PSR’s new rules structuring reimbursement a new insurance policy for bank account holders should be reviewed. The terms and conditions, including the behaviour of the bank account holder could be appropriate. For example, having one scam is allowed: a second the policy fee is increased and for a third protect removed. The EU Instant Payment Directive and UK Law are clear, should a payment be made by the bank on instructions given by the customer, regardless of the information being fictious, the customer is liable.

Throughout the conference the emotional and psychological of being defrauded was stressed. It is not simply the financial loss but the perceived loss of face by the person who has been conned. It is difficult to appreciate the gullibility shown by people when approached by a fraudster: Scams:

  Romance: 7 people were found to be sending “Harry Styles” money to complete in a new musical album – the true Harry Styles has bought a second London mansion.  

Nigerian Princes are back: reimbursement of £20,000 for bitcoin held in your name (when you have never bought a bitcoin).

Too good to be true: Offers of iPhones for £1. 

Social media is seen as integral to being scammed as 75% scams originate from this sector. Incentives to change social media’s stance towards victims being scammed off their platforms need to be increased. The common response of ‘call your bank’ is simply not good enough. The EU incentives of 10% of a company’s annual revenue is a great incentive. The US also uses massive fines, often in the $ billions, to correct financial practises from large corporations. 

It is important to support PSR and make verification and reimbursement part of the UK Banking. This approach is fair and can be exported to the rest of the world now that the use of instant payments is accelerating.  In additional let’s bring in the insurance industry to help protect people’s bank accounts from scammers.