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28 May 2019

Scam victims to be reimbursed under new code: has your bank signed up to protect you?

Find out if your bank has signed onto a new voluntary code

People tricked into sending their life savings to fraudsters could see their money reimbursed from today onwards, as a new voluntary code comes into effect. But only some banks have signed up so far - so will you be protected?

Approximately £674 every minute is lost to bank transfer scams, new research from Which? has found. In the past year alone, victims lost a total of £354m, with most of it stolen from personal accounts.

Earlier this year, the banking industry introduced a new voluntary code that would offer increased protection from scammers, including reimbursement to blameless victims. The move came two years after Which? launched a super-complaint to push banks and regulators to better protect people who lose money to bank transfer scams.

The new code comes into effect today, but not everyone will benefit.

Which? explains who will be protected, and urges more banks to sign up to safeguard your cash.

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How the code protects you

In a bank transfer scam, a criminal tricks you into transferring money to their bank account. Often, scammers will pose as your own bank, asking you to move your money to 'protect it'.

Alternatively, they may imitate an organisation you trust, like HMRC, or try to sell you goods or services that don't exist.

Previously, banks often refused refunds because the customer technically 'authorised' the transfer, even where the victims were targeted by sophisticated criminals. In fact, last year, just 23% of the losses were returned.

Under the new code, banks and payment providers will be required to follow a new set of standards to protect customers, including detecting high-risk payments, identifying vulnerable customers, and delaying or freezing payments that might be part of a scam. Both the bank who sent the payment and the one that receives it have a duty to take action.

If you fall victim, and either bank has fallen short of these standards, your own bank will be required to refund your losses. If the banks did nothing wrong, you'll still be reimbursed from a communal pool - although funding for this is only guaranteed to the end of 2019.

Banks will also bring in a new security system, known as 'confirmation of payee', which will warn you if the name you enter doesn't match the account details.

The deadline for banks to start issuing checks was originally 1 July 2019, but it's now been pushed back to 31 March 2020 - a delay that's expected to cost a further £109m in losses.

Ruth Evans, independent chair of the APP Scams Steering Group, said: 'From today, the majority of consumers will be covered by the Code and it is great to see that many more banks and PSPs are working towards joining the scheme. It remains vital that every sector - banks, consumer groups, technology and telecom firms, regulators and government - does all it can to tackle this devastating crime and prevent money getting into the hands of criminals.'

Which banks have signed up?

The new code is a huge step towards protecting consumers and ensuring victims aren't out of pocket - but not everyone will benefit. Around 17 brands, covering 85% of all electronic transfers, have signed up so far.

Customers of the following banks can rest assured that they'll be protected by the new rules:

  • Barclays
  • HSBC
  • First Direct
  • M&S Bank
  • Lloyds Bank
  • Bank of Scotland
  • Halifax
  • Metro Bank
  • Nationwide
  • Royal Bank of Scotland
  • NatWest
  • Ulster Bank
  • Starling Bank
  • Santander
  • Cahoot
  • Cater Allen

Meanwhile, if you bank with TSB, you can benefit from its new fraud guarantee, where it promises to reimburse any of its customers who are genuine victims of fraud.

Monzo announced on 28 May that it would be signing up to join the code, and would start implementing its principles beforehand.

Tesco Bank also confirmed it planned to sign up to the code in future, and that victims would be refunded in the mean time if they were not negligent.

Bank of Ireland said it 'fully supports the principles of the voluntary Code and work is already underway to become a signatory to the Code. In the meantime, we will continue to support all customers who fall victim to Fraud, providing them with the necessary support and guidance and reviewing each case in line with APP best practice standards.' Bank of Ireland also provides current accounts through Post Office Money, although these will close on 11 September 2019.

Sainsbury's Bank told Which? it is currently reviewing all aspects of the code, but has limited to exposure to bank transfer fraud as it doesn't provide current accounts.

A spokesperson for CYBG, which owns Virgin Money, Clydesdale Bank and Yorkshire Bank, said: 'CYBG was not part of the original working party on the voluntary code, however, we are committed to implementing the code as soon as possible. In the meantime, we will look at the circumstances of any victims of push payment scams on a case by case basis, bearing the code in mind.'

How will you be reimbursed if you're a victim?

The new code comes into effect today (28 May). If you fall victim to a bank transfer scam after this date, you should report it to your bank as soon as possible. If your bank is part of the code, it will confirm whether it will reimburse you within 15 business days, and the reimbursement should come without delay.

Should the bank need more time to investigate, it cannot take more than 35 business days (roughly seven weeks).

If you're not happy with how the banks involved - either the one from where the money was sent or the bank that received the funds - have dealt with your case, you can complain to the Financial Ombudsman Service.

Even if you were scammed before today, it may still be worth taking your complaint to the FOS, who will judge whether the banks' met their obligations.

Find out what to do if you're a victim of bank transfer fraud.

What will I need to do?

While the code creates new requirements for banks, you'll also need to meet certain standards.

Banks may refuse to refund you if:

  • 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

Keep in mind that banks may use a strict interpretation of 'gross negligence', so if your claim is refused on these grounds, it may be worth escalating your complaint to the FOS.

Which? calls for banks to protect victims

Which? believes the code is a key first step to putting an end to bank transfer fraud and urges all banks to sign on.

As the code is implemented, we're calling on the industry to ensure its success by meeting these five key tests:

  • Banks must promise to protect their customers by signing up to the Code with the regulator pledging to conduct a one-year review on its effectiveness.
  • The regulator must ensure all banks introduce vital name-check security (confirmation of payee) no later than its new deadline of March 2020.
  • No blameless scam victim should ever be denied reimbursement again, and full refunds should be issued swiftly.
  • Banks must show they are serious about protecting consumers by immediately agreeing a long-term funding solution for no blame refunds.
  • Banks must publish victim and reimbursement figures on a regular basis to allow effective monitoring in the fight against transfer fraud.

Gareth Shaw, head of Money at Which?, said: 'Three years after Which? launched a super-complaint highlighting the devastating impact of bank transfer fraud, it's good that consumers are finally getting greater protections and many should be spared from losing life-changing sums of money.

'The code will be judged a success if it halts this worsening crime and results in all blameless victims being fairly and swiftly reimbursed - and we want to see all remaining banks signing up as a bare minimum to reassure their customers that they will be protected.

'Banks must now ensure vital name check security measures are introduced on time and quickly agree long-term funding plans for all reimbursements - as there can never be a return to the dark days of banks turning away the victims of this ruinous crime.'

You can join our campaign bysigning the petitioncalling for the government to safeguard us from scams.