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Banks slammed for failing to tackle online fraud

An estimated £10bn a year lost to online fraud and scams

Banks slammed for failing to tackle online fraud

Banks, the government and some police forces are failing in their duty to fight the growing scourge online fraud, according to an influential group of MPs.

In a critical report which drew on several Which? investigations, the Public Accounts Committee (PAC) also attacked fraud education campaigns including the government-backed Take Five initiative as being poorly targeted and suffering ‘low awareness’ from the general public.

It found that online fraud is now the most prevalent crime in England and Wales, costing an estimated £10 billion a year – but only around 20% of incidents are ever reported to the police.

It comes after Which? used its legal powers to make a bank transfer fraud super-complaint to the Payment Systems Regulator (PSR) and alert the Financial Conduct Authority in September 2016.

The report was welcomed by Which? money expert Gareth Shaw, who said: ‘It is right that the Public Accounts Committee is treating online fraud with such severity, as we know first-hand the devastating impact it continues to have on consumers.

‘We need to see real progress from the Joint Fraud Taskforce on this issue and for the banks to urgently introduce measures to compensate victims and stop these scams from happening in the first place.’

Damning findings

The report, influenced by Which? research, made six key observations and recommendations:

  1. Banks do not accept enough responsibility for preventing and reducing online fraud and there is no data available to assess how well individual banks are performing.
    The Home Office is urged to set out minimum standards for banks to follow on preventing online fraud and on protecting bank customers. Banks should be required to report their performance against these standards to government, and to publish more data on the relative vulnerability of different banks.
  2. Unless all banks start working together, including making better use of technology, there will be little progress on tackling card fraud and returning money to customers.
    Working with the Joint Fraud Taskforce [a group comprising banking, policing and government representatives], the Home Office should make sure all banks to make better use of technology and information to reduce card fraud and return money to customers. This should include establishing strong technical standards for authenticating customers’ electronic payments.
  3. The PAC is not convinced that current awareness campaigns such as Take Five are proving effective.
    The Department, working with others on the Joint Fraud Taskforce, needs to develop a more informed approach to its education campaigns— being specific about what it is trying to achieve, evaluating what works best, and targeting campaigns towards specific groups.
  4. The Home Office has not yet put in place effective arrangements for its oversight of a coordinated and effective response to online fraud and for reporting on its progress.
    It should develop specific plans for how it will measure progress in tackling online fraud and judge the success of the Joint Fraud Taskforce, and it should regularly publish information on progress and performance. It should update the PAC on progress by the end of March 2018.
  5. The Home Office lacks data to judge whether its response to tackling online fraud is working.
    The Department must prioritise efforts to improve the collection and reporting of data on fraud. It should update the PAC on progress by the end of March 2018 on this, and on how it is improving information sharing between government, industry and law enforcement, and working with Action Fraud to reduce the gap between reported and actual fraud.
  6. The response to tackling online fraud is variable across different police forces, and for some it is not a priority.
    The Home Office should, with the City of London Police, establish what more they can do to help all police forces tackle online fraud, including opportunities to identify, develop and share good practice in a more systematic way.

‘Unprecedented threat’

PAC chair Meg Hillier MP branded online fraud ‘a virulent and unprecedented threat that has taken hold rapidly, causes untold misery and costs individuals and businesses billions of pounds each year.’

She called on banks to ‘step up, take responsibility and focus sharply on protecting and informing their customers,’ adding: ‘Policing must also be more consistent.’

Security minister Ben Wallace said: ‘Through the Joint Fraud Taskforce we are taking a collaborative approach to seek improvements in reporting. We have invested £5.5m in an improved reporting system in Action Fraud, which will not only improve the service for individual victims, but will also introduce systems such as improved bulk reporting for business.’

Responding on behalf of the financial services industry, UK Finance chief executive Stephen Jones said: ‘The banking sector is committed to preventing customers falling prey to financial scams, investing hundreds of millions every year to tackle this growing issue and preventing £6 out of every £10 of fraud.  

‘The fight against fraud and scams requires public and private sector organisations to work together. Sharing information between institutions is an essential part of the fight but current legislation does not provide adequate safeguards to allow this.

‘We want to build on our current close partnership with the government and regulators to make the changes necessary to protect customers and prevent more scams without slowing down genuine transactions, and to make it clearer to customers when they can expect a refund if they have been the victim of payment fraud.’

The Association of Police and Crime Commissioners welcomed the report, saying: ‘What is particularly useful is the recognition that tackling online fraud is not only an issue of preventing crime, it’s also about ensuring victims receive a high quality service from the police.

‘Online fraud does not recognise county borders. As the Online Fraud and Cybercrime lead, I will be working with fellow PCCs, policing and criminal justice partners and other agencies to tackle this growing problem.’

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