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Banks warn of fraud ‘pandemic’ as losses soar from authorized push payment scams

The UK is facing a “scam pandemic”, due to a rise in scams in which victims are tricked into depositing cash into scammers’ accounts, according to a services trade body. finance.

According to a UK Finance report released on Wednesday, more than £580m is lost in 2021 in this type of scam so-called authorized push payment fraud – a 40% increase on the same period last year – reflecting It reflects an attempt by criminals to exploit the pandemic.

“Frauders are becoming increasingly adept at adapting their methods to changes in our lifestyles and in consumer behavior. Katy Worobec, Economic Crimes Executive at the UK Treasury said we can only tackle this through effective coordinated action.

“We need ongoing efforts from government and other sectors to address today’s national security threat.”

Total damage to cheat in the UK has grown to £1.3 billion in 2021 from £1.2 billion in 2020. Around 44% of the total comes from authorized push payment fraud, according to the finding, while 40% are related. to payment cards, including counterfeits.

An additional 15% comes from remote banking transactions, done over the internet, phone or mobile app.

Bar chart of total financial fraud losses by type (%) showing authorized push payment fraud costing UK consumers the most in 2021

Of the nearly 200,000 authorized push payment fraud cases reported by UK Finance membership, “purchase scams” – in which victims pay for goods or services they never received – are the most common, accounting for nearly half of all cases.

However, investment scams cause the most damage. Scammers have taken £171.7 million from victims for fictitious investments – in commodities such as gold, property and cryptocurrencies – albeit in only around 5% of cases.

Many of these scams start on online platforms, but can also come by email or even mail. Scammers sometimes masquerade Trusted financial content creator to gain the trust of the victim.

Bar chart of money lost to scams (millions of pounds) showing investment scams and impersonations that cost victims the most

Pressure is growing on social media companies to rein in online scammers. In April last year, major banks and telecoms formed Stop Scams UK, a group promoting tech giants to help fight financial crime, with Meta, Google and Microsoft among those joined.

Online platforms will also face the duty of being careful to protect their users from fraud under secure bill online introduced in parliament in March.

“We’ve seen a lot of things get started on these platforms – what I really want to see is a partnership to close these opportunities before they reach customers,” says Worobec. “We have to stop fraud, not argue about who pays on the other end of the line.”

Frauds involving impersonation of police officers or bankers were the second highest in terms of value, with £137.3 million losing to these forms of fraud. This figure represents an increase of more than 50% at the 2020 levels.

Losses due to “advance fee fraud” also increased significantly, increasing 45% year-on-year to £32.1 million.

UK Finance sees a growing trend of scammers asking for upfront payments for fake loans, as well as fees to access overseas lottery funds or items held at customs .

Lloyds Bank warned last month that advanced fee loan scams have nearly doubled in the year to date, with victims losing an average of more than £200.

“As the cost of living rises, fraudsters are increasingly turning to advance fee scams,” said Liz Ziegler, Lloyds director of financial crime and retail fraud. “They know that some people will need more support with their own money, and victims in these cases often have poor credit scores or may already be experiencing financial hardship.”

Most street banks are signatories to a voluntary code established in May 2019 designed to improve compensation for victims of online fraud. But in 2021, only £238.1m of authorized push payment losses will be returned to victims by lenders under this rule.

The government said the way the code was applied was “inconsistent”, with compensation varying between banks backing the code.

In May, ministers announced plans to allow the Payments Systems Authority, which sets the rules for banks and other payment service providers, to force banks to compensation for authorized payment fraud victims.

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