Losses to bank transfer fraud increased by 71% during the first half of 2021, exceeding the amount of money stolen through card fraud for the first time, according to latest figures from UK Finance.
Not only is more money being lost, but less is being repaid to fraud victims. Of the £355.3m lost to bank transfer scams in the first half of the year, just £121.7m was reimbursed to victims – just 42.4% of the losses. That’s down on the 45.8% reimbursed in the second half of 2020.
This is despite many banks being signed up to a voluntary code pledging to reimburse victims unless they’re at fault.
UK Finance says fraud is ‘now at a level where it poses a national security threat’, and is calling on the government for coordinated action, and to ensure all economic crime is brought within the scope of the Online Safety Bill.
Indeed, while victims lost £479m in 2020 to bank transfer fraud, this is set to almost double by the end of 2021 if money continues to be lost at the same rate as the first six months of the year.
Here, Which? looks at the scale of the APP fraud problem and what safeguards there are to stop you falling victim to scammers.
What is bank transfer fraud?
Bank transfer fraud is also known as authorised push payment (APP) fraud. It usually involves scammers lying about who they are in a bid to trick victims into transferring money to them.
There were 106,164 cases of APP fraud in the first six months of 2021, the majority on personal accounts. However, APP fraud can come in a range of guises and they’re all increasing.
Losses from impersonation scams reached more than £129m, an increase of 123% compared to the same period in 2020.
This type of scam involves scammers posing as your bank, solicitor, the NHS or an official body such as HMRC.
In some cases, fraudsters use number spoofing to try to convince you they’re real – this involves using technology so it appears as though the genuine person or company is calling you.
Almost £108m was lost to investment scams (up 95%), which can involve ads on social media for bogus investment products offering high returns to encourage people to part with their cash.
There was also a 62% rise in the amount lost to romance scams, which topped £15m. Fraudsters target people looking for love, often via online dating, befriending them before asking them for money.
Finally, purchase scams were found to be the most common form of APP fraud. This is when the victim pays in advance for goods and services that are never received. They usually involve the use of an online platform, such as an auction website or social media advertising the sale of a popular product at a low price.
Some other worrying trends include scammers targeting people as young as 14 via social media platforms to become ‘money mules’ – where their bank account is used to launder stolen money.
There has also been a notable increase in the use of cryptocurrency wallets to remove stolen money from the banking system where it can no longer be recovered and is more difficult to track.
What fraud protection do you have?
Most banks signed up to a voluntary code in 2019, which means they must take steps to protect customers from fraud and reimburse those that aren’t to blame for falling victim to a scam.
According to the code, banks are required to:
- Educate customers about APP scams – including what to watch out for and how to protect themselves against fraudsters
- Identify high-risk payments and vulnerable customers
- Provide effective warnings when an APP scam risk is identified, including giving customers warning messages when they make payments or add new payees
- Talk to customers about payments, and in some cases delay or stop payments when scam concerns arise
- Act quickly when scams are reported
- Take steps to stop fraudsters from being able to open fake bank accounts.
The code applies to bank transfers made between UK accounts, but doesn’t cover transfers made to overseas accounts.
- Find out more: best banks for dealing with fraud
Is the code helping victims of APP fraud?
Which? campaigned heavily for banks to sign up to the voluntary code, and scam victims are being reimbursed more since it’s been in place.
However, Which? is now calling on the Payment Systems Regulator (PSR) for strong and urgent action to ensure banks do more to protect consumers, and treat victims fairly and consistently.
We have reported on instances where banks have not only been too quick to blame customers for ignoring fraud warnings, banks are also expecting too much of customers when it comes to making ‘sufficient checks’ before making a payment.
We recently reported on the case of Alma, who lost her life savings of £64,000 after receiving a fake Lloyds text – but was initially told her bank would not reimburse any of the money.
Jenny Ross, Which? money editor, says: ‘A staggering amount of money has been lost to fraud during the pandemic, and it’s particularly concerning that losses to bank transfer scams have overtaken card fraud for the first time.
‘Five years on from Which?’s scams super-complaint, most of the money lost by bank transfer scam victims is still not being reimbursed. This shameful situation raises serious questions about the regulator’s response to fraud and the behaviour of banks that all too often wrongly try to pin the blame on their customers.
‘The payments 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. It must work quickly with the government to get the powers it needs to deliver this.’
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