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25 Sep 2018

Bank transfer fraud hits £145m in just six months

Only 20% of stolen funds are ever recovered, new data reveals

Fraud victims have lost more than £145m so far this year to the scam that leaves them with no legal way of getting their money back - and just 20% of losses have been recovered, new data reveals.

A report from UK Finance, the trade body that represents the banking industry, shows that there were around 34,000 cases of'authorised push payment' fraud - where victims are tricked into sending money to a fraudster via a bank transfer - the first six months of the year, with losses averaging at around £4,260.

Banks were only able to return £30.9m to victims of push payment fraud - meaning just £1 from every £5 stolen has been recovered.

Total losses from all types of fraud totalled more than £500m for the first half of the year.

Consumers have been losing life-changing sums of money to this type of fraud yet, unlike money stolen from accounts, there is no legal protection in place to pay back losses.

Which? has been campaigning for banks and regulators to do more to protect consumers from the threat of this kind of fraud. A reimbursement scheme is due to be introduced, with details expected this week.

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How big a problem is bank transfer fraud?

In 2017, around 43,875 cases of bank transfer scams were recorded in 2017, totalling losses of £236m, according to figures from UK Finance.

The trade body says that the numbers from the first half of this year cannot be directly compared, as it is collecting more data than ever before from more banks. But the figures strongly suggest that the problem is getting far, far worse.

If you fall for a scam and pay by credit card, you can usually reverse the payment and recover your funds under Section 75 of the Consumer Credit Act. If funds are stolen from your account by a third party without your authorisation, your bank will usually refund you.

But if you pay by bank transfer, clawing back your funds is much more difficult. Your own bank usually cannot cancel the payment, unless you act within a short timeframe. In most cases, banks refuse to pay victims back, because the payment was authorised by the sender.

What are the main types of bank transfer fraud?

According to the report, bank transfer fraud can be split into two groups - 'malicious payees' and 'malicious redirection'.

Malicious payee fraud sees people tricked into paying for goods and services they believe they are legitimately buying, but in fact are being drawn into a scam.

UK Finance says purchase scams, where victims pay in advance for products and services, such as holidays, cars or electronics but never receive the goods, 'were the most prevalent bank transfer scam, accounting for almost two thirds of reported APP cases with a total of £19.4m lost.'

Malicious redirection scams see people sending payments to what they think are legitimate businesses, but in fact a criminal has redirected the victim to a different bank account.

Other types of malicious payment and redirection scams

Advance fee scam:Victims are tricked into thinking they've won an overseas lottery or are buying jewellery, and need to pay a fee to release the funds - which of course they never receive. More than 3,600 victims have lost £6m.

Investment scam:Tempted into a high yielding investment, victims lose money to carbon credit, landbanking and cryptocurrency scam investments. Some 1,300 people have lost a staggering £20.9m

Romance scam: UK Finance defines this as a 'victim is convinced to make a payment to a person they have met, often online through social media or dating websites, and with whom they believe they are in a relationship.' Some 571 people have lost more than £5m.

Invoice and mandate scam: This type of scam involves email interception of a legitimate firm you're dealing with - such as a trader or lawyer. They notify you that their account details have changed so that you pay a bill into an account set up by scammers. The losses from this scam are shocking - some £49m lost in the first six months of this year.

Impersonation: Fraudsters pose as banks, the police, utility companies or government to be told their account has been compromised and to send funds to a new safe account, or to pay a fictitious fine. In the case of bank and police impersonation, some 1,900 victims have lost £22m. In other types of impersonation, a further £14m has been lost.

CEO fraud: UK Finance defines this as 'wherea victim attempts to make a payment to a legitimate payee, but the scammer manages to intervene by impersonating the CEO of the victim's organisation to convince them to redirect the payment to the scammer's account.' While only 347 people have fallen victim to this, losses are high, at £8m.

What's being done to protect people from bank transfer scams?

Banks argue that they've introduced a raft of new measures to protect people from scams, including developing a rapid response scheme for branch staff to report crimes, which has reportedly stopped £14.6m in fraud and led to 100 arrests.

It also says that it prevented £705m in unauthorised fraud attempts in the first half of the year.

But Which? believes banks' response to this emerging crime has been woefully insufficient, leading to people losing life-changing sums of money.

We launched a super-complaint to the Payment Systems Regulator in 2016, calling for it to take action and force banks to reimburse victims of this type of fraud.

It agreed, and came up with a package of measures to help protect consumers, including a reimbursement scheme, better reporting of fraud, and a 'confirmation of payee' tool, which matches up the name of the account holder with their account details.

Details of a reimbursement scheme are due to be published this week, but under proposals, victims would be entitled to a refund from their bank in certain circumstances.

As Which? reported this week, solving fraud crimes becoming increasingly difficult for authorities. Our figures suggest that 96% of reported fraud goes unsolved, and the number of fraud cases solved by regional police forces has declined in the past three years.