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18 Mar 2020

Bank transfer fraud losses soar to almost £500m in 2019

Fraud refunds rise - but just two in five victims get their money back

Losses from bank transfer fraud soared to £456m last year, despite dozens of banks signing up to a code to protect their customers from these type of scams.

However, the number of people getting their money back from bank transfer scams has risen following the introduction of the code in May, following pressure from Which?. A total of £116m was returned to victims, equivalent to 25% across the year, although this rises to 41% following the introduction of the code.

The figure come from UK Finance, the trade body representing the banking industry.

Bank transfer scams are technically known as 'authorised push payment' fraud. This is where you are tricked into sending money to a criminal's bank account.

Until last year, victims of this type of scam had no way of recovering their money, as they had authorised the payment to the fraudster.

However, most major banks have signed up to a voluntary code of conduct that sees them reimbursing you if they have failed to protect you from scams, or if you have no been at fault for the scam.

Not all banks have signed up - and last year an influential group of MPs called for the code to be mandatory. Later this month, six big banking groups will introduce technology that should help prevent these types of scams from taking place.

What is bank transfer fraud?

Bank transfer fraud sees you tricked into sending money to the bank account of a fraudster. 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.

Claiming for bank transfer fraud compensation

In May 2019, a voluntary code of conduct was introduced to give customers more protection from bank transfer fraud. So far, just over half of the UK's banks have signed up to it. The code requires banks, building societies and other payment providers to do more to protect customers from scams or, if they fail to do so, to reimburse victims.

Banks will need to take steps to detect payments that might involve scams, provide clear warnings to customers about the risks of bank transfers, and identify potentially vulnerable customers. They must also freeze or delay payments that they think might have come about from scams.

If either the bank that sends the funds or the one that receives them fails to meet these standards, it must reimburse you for the money you have lost. If neither you nor the bank was at fault, you will still be reimbursed from a bank-funded compensation fund.

Bank transfer fraud losses widen

More than 122,000 people and businesses fell victims to bank transfer fraud in 2019, according to the latest figures - an increase of 45% on the previous year. Losses rose by 29%, from £354m to £456m.

In 2018, around 23% of the money lost to this type of scam was returned to victims. But individuals, rather than businesses, lost £228m that, and got £42m back - less than £1 out of every £5 lost, or 18%.

Last year, the overall proportion of losses reimbursed to victims has hardly risen. Some £116m was paid back to consumers and businesses, around 25% of losses. Individuals lost £317m and saw £82m reimbursed - equivalent to £1 in every £4 lost, or 25%.

This suggests that the code of conduct is not working as well as it could do, with reimbursement failing to rise as a result of its introduction.

But UK Finance says that losses from victims assessed against the code, introduced almost halfway through 2019, totalled £101m, with £41m paid back, or 41%.

While that's an encouraging increase, it still means that tens of thousands of victims have not been reimbursed.