Call for banks to do more in fight against money transfer scams

Banks must do more to crack down on scams, a watchdog has said. Picture: Chris Radburn/PA Wire

Banks must do more to crack down on scams, a watchdog has said. Picture: Chris Radburn/PA Wire - Credit: PA

Banks must do more to combat scams where customers are tricked into transferring money to fraudsters, a watchdog has warned.

The Payment Systems Regulator (PSR) has set out an action plan following a 'super complaint' made by Which? over concerns that, unlike many other payment methods, victims conned into transferring money by bank transfer to a fraudster have no legal right to get their money back from their bank.

But Which? said that by not making banks liable when someone loses their cash to such a scam, banks had been let off the hook.

The PSR said more can be done to prevent scams happening in the first place and to respond faster to help people get their money back.

It said information about the scale of the problem is 'poor' and the industry should compile robust statistics.

Banks should also look at what information could be shared to help victims recover their cash. A common approach to best practice standards should also be developed, which both the victim's bank and the bank that receives the money should follow when responding to reports of scams, the PSR said.

But the regulator stopped short of proposing changes to make banks liable for reimbursing victims of such scams, saying at this stage there is not enough evidence to justify a change in liability. As more evidence comes to light, it said it will consider whether it is appropriate to propose changes to banks' obligations.

Most Read

The PSR will review the progress made by the industry in the second half of 2017.

Alex Neill, managing director of Which? home and legal services, said: 'The regulator has finally acknowledged the considerable consumer harm caused by bank transfer scams.

'However, while recognising that the industry is not doing enough, it has failed to adequately address the issue of liability and has let the banks off the hook, giving them little incentive to do more to protect their customers.

'The outcome for people is unfortunately that they will continue to be scammed out of millions of pounds. We need to see swift action and not see this kicked into the long grass in the second half of 2017.'

The consumer group has argued that consumer protections have failed to keep up with changes in how people pay. UK consumers now make over 70 million bank transfers a month, compared with just over 100 million in a whole year a decade ago.

Which? said that in the first two weeks after launching an online scams reporting tool in November, more than 650 people told it about losing over £5.5 million in total to bank transfer scams.

In one case it has seen, fraudsters claiming to be from a bank convinced a customer that their account had been compromised and to transfer £17,500 savings to another account, set up in their name.

Within minutes, the customer realised they had been tricked and contacted their bank, to be told the money had gone. The victim was offered a 10p refund - the amount the fraudsters had left behind.

Katy Worobec, director of Financial Fraud Action UK (FFA UK), which leads the fight against fraud on behalf of the payments industry, said: 'Protecting customers from fraud has been and continues to be the banks' priority. Banks have worked hard to enhance customer protection and will continue to do so.

'We must not lose sight of the fact that considerable effort is needed by government, law enforcement, industry and other parties working together to successfully tackle the fraudsters who are behind these crimes.'

FFA UK said there are barriers, including legal ones, that prevent banks from openly sharing information on payments where someone instructs their bank to send money to another account. It said banks have already called for new powers to allow them to share data to better detect and prevent financial crime.

It also highlighted points of weakness outside banks' control which enable fraud, such the compromise of personal and financial details from data breaches.

Earlier this year, FFA UK and the banking industry launched a campaign called Take Five, urging people to pause for thought before transferring money.

PSR managing director Hannah Nixon said there is 'no silver bullet', but more can be done to tackle scams.

She said: 'Tens of thousands of people have, combined, lost hundreds of millions of pounds to these scams, but the data we have seen so far is incomplete. We need a concerted and co-ordinated industry-wide approach to better protect consumers, and we need it to start today.'

Have you been a victim of a scam? Email