Revealed: £354m lost in bank transfer scams in 2018

More than £354m was stolen from banking customers and small businesses through sophisticated bank transfer scams in 2018 - with only £83m ever recovered and returned to victims.

New figures from UK Finance, the banking trade body, revealed that £209m was lost to bank transfer fraud in the second half of 2018 - a marked increase from the first half of the year, when some £145m was lost.

Bank transfer fraud - when a victim is tricked into sending money to a scammer from their bank account - has seen people losing life-changing sums of money, with no hope of getting it back.

Last month, several major banks signed up to a new code that includes a reimbursement scheme. But the code is only voluntary, and Which? is calling on all payment providers to sign up.

UK Finance also revealed that losses from unauthorised fraud, where money is taken from your account or card without your permission, totalled £845m in 2018, up 16% on 2017. But banks prevented a further £1.66bn from being stolen.

Find out more about the scale of bank transfer fraud, and what protections banks have put in place.

How much is lost to bank transfer scams?

In total,£228m was stolen from individuals during the course of 2018, while a further £126m was taken from businesses.

However, the vast majority of cases involved people being scammed, rather than companies - there were a total of84,624 cases over the year, of which 92% involved personal accounts.

Banks managed to recover £52m from the fraudsters in the second half of the year, just 24% of what was lost - around the same success rate as over the first six months, when £31m was recovered.

How does bank transfer fraud happen?

In some cases, the fraudster impersonates someone you trust - for example, your solicitor - and sends through an invoice for payment to their account. Fraudsters will also pose as well-known companies or organisations, including HMRC or the DVLA, and ask you to pay a bill or outstanding fine.

Commonly, fraudsters pose as your bank and contact you to warn that your account has been compromised and to transfer money to a 'safe' account - when it fact it goes to a scammer.

The scammer may also pretend to be in a relationship with someone online to convince them to part with large sums.

In other cases, you might pay for goods or services that never arrive, or for an investment that doesn't exist.

• Find out more:how to get your money back after a scam

Can you claim compensation?

Currently, when you fall for a scam, the level of protection you have will depend on how you paid the fraudster. If you paid by credit card, you can usually reverse the payment under Section 75 of the Consumer Credit Act.

And if the funds were taken from your account without your authorisation, your bank will normally refund you.

But if you pay by bank transfer, then realise you've been tricked, it's more difficult to get your money back.

Victims will have more protections from May 2019.A new voluntary code has been introducedrequires banks, building societies and other payment services providers to put measures in place to protect customers from bank transfer fraud - and those that fail to do so will need to reimburse victims.

Under the rules, banks are required to take steps to detect payments that are at high risk of involving a scam, provide warnings to customers about the risks of money transfers, and identify customers who might be vulnerable. Banks must also delay or freeze payments they suspect might have come about from a scam.

If any of the banks involved in the transaction don't meet these standards, your bank will be required to reimburse you. You should be told within 15 business days of reporting the scam whether you're receiving a refund.

In some cases, it may be that neither the banks, nor the victim, are to blame. These victims will still be reimbursed under the code, with a small number of banks supporting a compensation fund.

But this will only last until the end of 2019 unless a more permanent arrangement is agreed, and there's a risk this group of people could miss out in future.

• Find out more:bank transfer scam victims to get refunds from May 2019

New rules for bank customers

The new rules also put obligations on customers to be vigilant when making bank transfers.

Your bank may refuse you a refund if it finds:

• You ignored warnings about scams when setting up and amending payees, or before making a payment
• You did not take care to establish that the person you were sending money to was legitimate
• You were 'grossly negligent' - although this is very difficult to define
• You're a small business or charity and did not follow internal procedures for making payments
• You acted dishonestly when you reported the scam

If you're unhappy with the way the banks have dealt with your case, you can escalate it to theFinancial Ombudsman Service. You can complain about either your bank, or the bank to which you sent money.

Scheme to warn customers of fraud risk

As part of the code, banks are being required to introduce new technology to warn customers if the recipient doesn't match the account owner.

This could help prevent fraudsters impersonating a person or organisation you trust - like solicitors or HMRC.

Currently, when you enter bank details to make a payment, the bank will check the sort code and account number to verify whether the account exists - but it won't check whether the name of the account holder is correct.

The new system - known as 'confirmation of payee' - will check the name you enter against the account owner and warn you if the details don't match.

Banks were expected to have this technology in place by July 2019. However, a spokesman for UK Finance, the trade body that represents the banks, recently told the Treasury Select Committee this could be delayed until 2020.

Which? urges banks to sign up to code

At the moment, the code and reimbursement scheme are both voluntary. Which? is urging all banks, building societies, and service providers to sign up to the code to ensure victims are fully protected, whoever they bank with.

Gareth Shaw, head of money at Which?, said: 'This alarming rise in bank transfer fraud suggests criminals are winning the war over scams as banks are still struggling to get a grip of this worsening crime.

'While a new voluntary code should offer victims some extra protection, the industry must do more to stop people losing life-changing sums of money in the first place - starting by introducing vital confirmation of payee security checks, which could cut bank transfer fraud in half overnight.

'Banks must also ensure the new reimbursement scheme works fairly to pay back victims and ensures that cases of people having their lives devastated by these scams when they are not at fault become a thing of the past.'

The following banks have already committed to the code:

• Barclays
• Lloyds Banking Group
• HSBC
• Metro Bank
• Royal Bank of Scotland
• Santander
• Nationwide

You can join our campaign by signing the petition calling for the government to safeguard us from scams.