Scammers have reported a H1 2021 financial bonzer worthy of any unicorn.

UK Finance saw a 71% increase in the first half of 2021 to £ 355million for APP (push payment authorized) fraud 1. The first time the APP broke credit card fraud. One scam in particular, bogus bills to bereaved families, rose 100% in the first half of 2021 to reach £ 45million.

Banks, which hold the bank accounts that all fraudsters or their surrogates / mules use, continue to seek out but do not implement activities that could slow the growth of fraud. When such activities are implemented, for example, Payee Confirmation (CoP) which matches the registered account name to the submitted account name, scammers move their accounts banks without CoP. This gives fraudsters plenty of opportunities as 95% of banks do not use CoP. Only the first 6 banks mandated by the payment system regulator do so.

The reimbursement program (CRM-Code) during the first year saw on average only a quarter of the victims compensated, two of the big banks finding 90% of complicity, no money coming back.

The only ray of hope for the people after being the victim of fraud is the Financial Ombudsman Service (FOS), an independent service and final appeal process against banks’ opinions on victims of fraud helping fraudsters. They too are overwhelmed and have asked the banks “to do more to resolve complaints before people are forced to seek help from FOS.”

FOS has overturned 50-80% of decisions of major UK banks against their customers

For the first time in ten years, FOS has received more complaints about current accounts than any other product.

The majority of the cost of fraud is borne by the customers of the banks, not by the bank. Even though the ownership of bank accounts is with banks, customers are held responsible for paying a payee. Banks are only required to verify the sort code and account number, IBAN (International Bank Account Number). Designed for fast and efficient payments. No design requirements for fraud style trends. No one thought about the impact of social media on payments when Faster Payments was implemented.

Fraudsters take advantage of this because banks hold their customers responsible for fraud. Since the publication of the figures, banks are naturally concerned. If the trend continues; APP and bank fraud could exceed £ 1,000million per year in mid 2022.

UK Finance, the banking sector group, has warned the UK government of a threat to Britain’s national security, calling for coordinated action across all sectors2. A new anti-fraud emergency number is being introduced, covering 50% of the banking community. With one of the banks being quoted as saying it’s a cultural thing as Brits are too polite to say no and another that their fraudster’s Mule count is lower than their counterparts only encourages fraudsters .

Two things would help:

1. Banks must stand united against fraudsters and regulators – Bank of England, FCA, Payments Systems Regulator and Standard Lending Board – must ensure a secure passage of payments between the payer and the recipient bank. Here, more information is needed so that the payer can make an informed decision on the level of risk of ongoing fraud.
2. Consumers and businesses alike need a variety of tools that automatically question the legitimacy of the caller who approaches them. This will flag communications before responses are given.

Scammers are at the top and that needs to change. By tackling scammers’ technologies and techniques at the source, consumers and businesses can automatically stop scams before they start. Banks own the bank accounts and need to make sure they are together against fraud. Regulators should actively encourage this behavior.

2 https://www.reuters.com/world/the-great-reboot/surge-uk-fraud-national-security-threat-warn-banks-2021-09-22/

1 https://www.finextra.com/newsarticle/38832/banks-called-to-account-over-shockingly-low-rate-of-reimbursements-for-app-fraud