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COVID fraud on the rise – is your bank signed up to protect you?

The government should introduce new laws to protect people from losing life-changing sums of money to bank transfer fraud after the Brexit transition period is over, consumer finance and comparison site Which? has urged. 

At present, 18 banks are signed up to a voluntary code of conduct that should see victims of bank transfer scams – which involve you sending money to a fraudster from your bank account to theirs – reimbursed. Not all banks are signed up, and the regulator that oversees payments can’t force banks to follow the code because of a European law currently adopted in the UK.

If you do not know your bank’s status on the voluntary code and what their policy is, take out time today and find out by going on their website and following up with a call via secure phone banking if it is not crystal clear.

The reason it is important to be up to speed about your bank’s policy is because Which? believes that the current code is failing victims of bank transfer scams.

The code is being applied inconsistently, leaving customers “facing a lottery” when it comes to getting their money back – with many victims of sophisticated scams still denied reimbursement, according to Which?

The latest figures show that more than £200m was lost to this type of fraud in the first six months of 2020. But despite the introduction of the code of conduct, 38% was reimbursed to victims. That’s a fall on the second half of 2019, when 41% was returned. In August, Which? published a report alleging that scam victims were facing a lottery when it came to getting their money back, with banks applying the code poorly and inconsistently.

Fraudsters adapting to COVID-19

UK Finance is warning that criminals have been exploiting and adapting to Covid-19 with a growth in fraud and scams that target people online. Many of these scams harvest customers’ personal and financial details, for example through phishing emails or smishing text messages impersonating trusted organisations.

“There is often a delay between criminals obtaining people’s details and using them to commit fraud, meaning the full losses from Covid-19 related scams in the first half of this year are likely to not yet have been fully realised,” said UK Finance.

Customers are reminded to follow the advice of the Take Five to Stop Fraud campaign and always take a moment to stop and think before parting with their money or information in case it’s a scam.

Check out the Take Five to Stop Business Toolkit here.

Brexit transition could leave victims unprotected

In its response to the Treasury’s review of the payments landscape, Which? has outlined how changes to legislation could allow regulators to require all banks to follow a statutory code offering strong protections for scam victims.

The Payment Systems Regulator says that it currently lacks the powers to take action on reimbursement, because of the EU Second Payment Services Directive. This law prohibits EU member states – and the UK, during the transition period – from forcing payment service providers to go beyond the terms set out in the Directive.

As a result, the regulator argues that it can’t currently require reimbursement to be made to victims of bank transfer scams.

“A change in legislation would provide the regulator with the power to direct the Faster Payments Scheme, which facilitates bank transfers, to introduce a new guarantee into its rules that includes protection for victims of APP fraud – similar to the guarantee in place for direct debits,” said the consumer advice site.

How are banks supposed to protect you?

A voluntary code of conduct was introduced in May last year, which would see you reimbursed by your bank if you fell victim to a scam, such as an APP scam and you aren’t to blame. Banks also have duties to protect you and should reimburse you if they’ve fallen down on any of these steps, including:

  • Educating customers about APP scams
  • Identifying higher-risk payments and customers who are vulnerable and so have a higher risk of becoming a victim
  • Providing effective warnings to customers if the bank identifies an APP scam risk – these could be messages when you go to make a payment or set up a new payee
  • Talking to customers about payments and even delaying or stopping payments where there are scam concerns
  • Acting quickly when a scam is reported to it Taking steps to stop fraudsters opening bank accounts.

If your bank is part of the code, it will confirm whether it will reimburse you within 15 business days and the reimbursement should come without delay. Should the bank need more time to investigate, it can’t take more than 35 business days (roughly seven weeks).

If you’re not happy with how the banks that are involved – either the one from where the money was sent or the bank that received the funds – have dealt with your case, you can complain to the Financial Ombudsman Service.

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