Fraud losses due to people being tricked into transferring money directly to criminals have surged by 71% this year, according to a trade association.
But less than half of the cash lost in such circumstances is being reimbursed to victims.
Some £355.3 million was lost due to fraud where people had authorised the transaction in the first half of 2021 – marking a 71% jump compared with the same period in 2020 – according to UK Finance.
Within the total, £296.1 million of was due to personal customer losses and £59.2 million was from business losses.
But less than half (42% or £150.7 million in cash terms) of the total was returned to customers.
Jenny Ross, Which? Money editor said: “This shameful situation raises serious questions about the payment regulator’s response and the behaviour of banks that all too often wrongly try to pin the blame on their customers.
“The regulator must introduce mandatory and more robust reimbursement requirements for all payment providers, to ensure that customers are treated fairly and consistently when they fall victim to a bank transfer scam.”
A voluntary code was set up to reimburse blameless bank scam victims – but concerns have been raised that some banks are not following it consistently and are expecting customers to have a sophisticated knowledge of scams. Not all banks have signed up to the code.
UK Finance published figures relating to those cases within the overall total which were dealt with under the voluntary code in the first half of 2021.
Of those cases, which have a total value of £248.6 million, £121.7 million or 49% was reimbursed to victims. Just over two thirds (68%) of cases involved values of less than £1,000, while 6% involved more life-changing sums of £10,000 plus.
UK Finance said fraud has reached a level where it poses a national security threat.
It said banks cannot solve the problem on their own – and Government-coordinated action is needed, including ensuring that all economic crime is brought within the scope of the Online Safety Bill.
Criminals use various forms of social engineering methods to manipulate people, including scam phone calls, texts and emails, as well as fake websites and social media posts.
Within the total, there was a 131% increase in losses due to criminals impersonating the police and bank staff, a 95% increase in losses due to investment scams and a 110% uplift in fraud losses where people pay fees in advance. Losses due to romance scams also increased by 62%.
Investment scams are heavily enabled by fraudulent advertising, search engines and social media, UK Finance said. In some cases, social media “influencers” are used to promote such schemes and create an air of legitimacy, it added.
In previous years, the bulk of fraud losses have been unauthorised frauds mainly committed using payment cards.
But for the first time, the amount of money stolen through bank transfer fraud – also known as authorised push payment (APP) fraud – has overtaken card fraud losses.
Criminals are also changing their tactics when moving money. They have been targeting people as young as 14 using social media to become money mules – where their bank account is used to launder stolen cash.
Intelligence also shows a notable increase in the use of cryptocurrency wallets being used to take stolen money outside of the banking system quickly, UK Finance added.
In total, £753.9 million was stolen through fraud in the first half of this year – a 30% increase compared with the same period in 2020.
Unauthorised fraud losses stood at £398.6 million, which was a 7% increase.
Some £6.49 in every £10 of attempted unauthorised fraud was blocked by banks and other financial firms, UK Finance said.
Katy Worobec, managing director of economic crime at UK Finance said: “Our latest figures show the sheer scale of fraud taking place in the UK and highlight clearly the need for coordinated action to address this threat.
“The banking and finance industry invests billions in advanced systems to try and stop fraud happening in the first place, but criminals are exploiting weaknesses outside of banks’ control to trick customers into making payments directly to them.
“This is why we are calling for coordinated action and increased efforts from Government and other sectors to tackle what is now a national security threat.”
TSB has its own fraud refund guarantee, which it said has resulted in 98% of its fraud cases being refunded.
Debbie Crosbie, chief executive at TSB, said: “Our experience shows the importance of being transparent on levels of protection and reimbursement, but beyond banks, social media and tech companies need to do more to reduce the increasing amount of scams emerging online.”
UK Finance urges customers to follow the advice of the Take Five to Stop Fraud campaign.
It is OK to reject, refuse or ignore any requests and only criminals will try to rush or panic people, it said.
People should contact their bank immediately if you think they have fallen for a scam and report it to Action Fraud.
Emma Lovell, CEO at the Lending Standards Board (LSB) which oversees the code for APP scams, said that, when applied correctly, “the code is working and has been successful in addressing what was previously a gap in protections for customers from APP scams before the code was launched”.
She added: “Reimbursement, whilst vital to reversing the financial distress caused by APP scams, cannot reverse the emotional distress that these scams cause, with the victim’s experience so often associated with feelings of guilt, shame, worry and embarrassment.
“It is therefore vital that we stop customers from having to go through this emotional and financial distress by preventing more APP scams from happening in the first place. That is why the code’s prevention and detection measures are so important.”
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