Victims lost £479m to bank transfer fraud in 2020, up 5% compared to the previous year, as fraudsters exploited pandemic fears to trick people into parting with money.
Less than half of that was returned to victims, despite banks pledging to reimburse them unless they’re at fault, according to new figures from UK Finance.
The amount returned – £206.9m – was over three quarters more than what was returned in 2019, but it still leaves victims £272.1m out of pocket.
Here, Which? takes a closer look at the scale of the problem and the tactics criminals are using to steal millions.
How bank transfer fraud works
Also known as authorised push payment (APP) fraud, bank transfer fraud involves scammers lying about who they are in order to trick victims into transferring them money.
They often pose as your bank, your solicitor or official bodies such as HMRC, using sophisticated methods of impersonation – ‘spoofing’ the genuine contact details of these organisations.
Sometimes, fraudsters pose as banks and contact you to tell your account has been ‘compromised’, and to transfer your savings to an account set up by the fraudster, which they have told you is safe.
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Coronavirus pandemic unleashes scams
The sum lost to APP scams rose 5% in 2020, but the actual number of scams rose by 22%, suggesting more individual scams taking lower amounts each time. Indeed, UK Finance figures show that under £1,000 was lost in the majority of APP fraud cases.
Fraudsters often exploit victims’ fears, panicking them into making hasty decisions. In the year the pandemic began, there was plenty for scammers to work with.
Listen: The Which? Money Podcast explains how to stay one step ahead of scammers
Some criminals played on the confusion around the government’s Covid-19 guidelines, claiming to be collecting fines or offering support. More recently, some have said they are collecting payments for the Covid-19 vaccine, which in reality is free.
Scammers jumped on other trends, too, posing as delivery firms to exploit the increase in online shopping. There was also a 38% rise in romance scams as more people turned to online dating.
Losses from investment scams – where fraudsters take payment for fake investments – increased more than any other kind of bank transfer fraud, totalling £135.1m in 2020.
UK Finance says it has even found websites this year openly advertising custom fraud services to other scammers, such as phishing website templates and scam apps that look like real banking apps.
Watch: find out how to avoid falling victim to an investment scam
What protections do you have?
Most banks signed up to a voluntary code in 2019, which says they should reimburse you if you’re a victim of an APP scam and aren’t ‘to blame’.
According to the code, banks are required to:
- Educate customers about APP scams
- Identify high-risk payments and vulnerable customers
- Provide effective warnings when an APP scam risk is identified, including messages when you make payments or add payees
- Talk to customers about payments and even delay or stop payments where scam concerns arise
- Act quickly when scams are reported
- Take steps to stop fraudsters from opening bank accounts
The code applies to transfers between UK accounts, but not overseas accounts.
- Find out more: which bank is best for dealing with fraud?
Is the Code helping victims?
Which? campaigned heavily for banks to adopt the code. Since it’s been in place, the amount reimbursed to scam victims has increased. But there’s still a way to go before all victims get their money back.
According to UK Finance, 47% of losses in cases assessed using the code were reimbursed in 2020. This is up from 41% in 2019 and 19% before the code was introduced.
This is progress, but it still suggests banks are saying victims are at fault in a large number of cases, despite fraudsters using increasingly sophisticated scam tactics to trick them.
UK Finance says £188.3m has been reimbursed since the code was introduced in May 2019 – a far lower figure than the total sum lost to APP fraud over that period.
Gareth Shaw, Head of Money at Which?, said: ‘A staggering amount of money has been lost to a growing number of scams since the start of the pandemic. The government now has the perfect opportunity to force online platforms to do more to protect their users from fraudulent content through its proposed Online Safety Bill.
‘Meanwhile, banks are failing to consistently follow the voluntary code that was put in place to protect customers from bank transfer scams. The majority of victims are refused reimbursement, with some banks all too often unfairly pinning the blame for these sophisticated scams solely on their customers. It’s time for these protections to be made mandatory and for prevention and reimbursement rates to be published on a firm by firm basis.’
- Find out more: five banking scams to watch out for in 2021