Explained: How new safety net will protect fraud victims

Nobody wants to discover they’ve fallen prey to a financial scam. Some good news, though – people who have been tricked into transferring money directly to a fraudster now have a new safety net, which should mean they have a better chance of getting a refund.

Some £354 million was lost to bank transfer fraud last year – most of it stolen from personal accounts. Financial providers were able to return £83m, or 23%, of the losses – meaning many victims were left out of pocket.

But a new industry code has been put into action, with a funding pot available for blameless scam victims.

Here’s a look at why the code has been introduced and how it works…

What’s the background?

Sophisticated scams have been persuading people to transfer money themselves directly to criminals – only to realise after the money has disappeared they have been conned. Scams could start with emails, texts and cold calls, and people could be persuaded they are transferring money to a legitimate organisation.

Scammers put victims under pressure, in some cases saying they need to transfer money urgently to a “safe” account. People have transferred large amounts and, because they authorised their bank to make the transfer, they may lose their cash for good.

By contrast, in cases where scammers steal money from people’s accounts without their knowledge, blameless victims are generally refunded.

So what’s happened now?

The new code has been introduced as part of a wider fightback against this type of scam – known as authorised push payment (APP) fraud.

It means victims who were tricked into transferring money but took reasonable care are much more likely to get their money back – even in circumstances where the customer’s bank has also done everything reasonably expected of it to protect the customer. The industry has committed to provide initial funding for these “no blame” situations until the end of 2019. A longer-term funding pot should be agreed by January 2020.

Is my bank taking part?

The code is voluntary, so not everyone has signed up to it. Banking brands that have committed include Barclays, HSBC UK, First Direct, M&S Bank, Lloyds Bank, Halifax, Bank of Scotland, Intelligent Finance, Metro Bank, Nationwide, Royal Bank of Scotland, NatWest, Ulster Bank, Santander, Cahoot, Cater Allen and Starling Bank.

Meanwhile, TSB has made its own fraud refund guarantee to customers, which aligns with the code but also goes further to cover some situations which may not be covered by other banks.

What else is being done to protect people from this type of fraud?

A name-checking service called “confirmation of payee” is also in the pipeline.

The Payment Systems Regulator (PSR) has proposed the UK’s six biggest banking groups, which are involved in 90% of bank transfers, fully put the confirmation of payee measures in place by March 31, 2020.

Confirmation of payee works by making sure the name of the account someone is sending money to matches the name they have entered. Alerts will notify the payer when there has not been a match.

What pitfalls should I watch out for?

Always take time to think and check if you’re contacted out of the blue about making a payment. Report any suspect approaches from people to Action Fraud and tell your financial services provider.

Help to avoid scams is available at takefive-stopfraud.org.uk.