Authorised push payment scams occur when a fraudster tricks a customer into instructing their bank to send money to an account controlled by the fraudster. Last year, data from UK Finance showed there were 43,875 examples of this type of fraud, resulting in losses of some £236 million.
The Financial Ombudsman has raised this issue with chief ombudsman Caroline Wayman saying that criminals’ methods to scam money are often so clever, that banks should think hard before they refuse to refund money and claiming that the customer has been “grossly negligent”. Instead, she says they should be looking at what measures were in place to protect the customer.
Some of those who fall victim to scams are more vulnerable - perhaps they are older or less financially astute. But, rather than blame them, the regulator and Ombudsman wants banks and other financial services firms to be aware of these circumstances and to build in more safeguards.
Leave your keys in a car and a thief jumps in and drives it away while you’re paying for petrol, then don’t expect an insurer to pay out. When it comes to banks and credit card companies though, claiming customers are negligent – even if they could have behaved more responsibly - is a very different matter.
Meanwhile, a new code of conduct for the way banks treat victims who are tricked into transferring cash to a fraudster’s account, is set to come into force.
The new rules from the Payment Systems Regulator, which are currently being consulted on, will provide a “contingent reimbursement model” so that customers will have more certainty about refunds but it also emphasises the need for consumer education. It is expected the new code will also be used by the Ombudsman to help adjudicate cases.
Reminding consumers that scams are prevalent and encouraging them to be vigilant is a government focus and the finance industry is taking action. So, whether in terms of attempting to gain access to pension funds, boiler room investments or authorised push payments, there should now be more awareness.
Take Five Campaign
One example is the Take Five campaign, from Financial Fraud Action, part of UK Finance. It is reminding people to take some time to consider whether an offer, request or proposition makes sense and to discuss any approach with family or friends if appropriate. It reminds people that imposters can be convincing and that personal details may have somehow been obtained, along with a clear reminder that being asked to transfer funds to a “safe account” would never be a legitimate request.
Banks need to prove their customers acted with “gross negligence” because even if a payment appears to be authorised by the customer, it may be that fraud was involved. Certainly, customers should keep an eye on their accounts, but scams are not all the same and indeed, are becoming more sophisticated. However, it is expected that a customer will tell their bank about an unauthorised payment promptly. Leaving it too long could be grounds for a refund to be refused.
Yet, the message coming out from the regulator and Ombudsman is that providing the customer does report the payment quickly and they can show they were misled, then the bank will have to reimburse.
As Ms Wayman says: “It’s not fair to automatically call a customer grossly negligent simply because they've fallen for a scam. That's especially true in light of the sophisticated way criminals exploit banks' security systems – and convince customers that their money is at risk. We often remind banks that they need to support what they're saying with facts. And if they can't do that, it's likely we'll tell them to cover the money their customer has lost."