Claiming compensation may become easier for fraud victims scammed into transferring huge sums of money to bank accounts controlled by crooks.
In the first six months of the year in the UK, 19,000 people inadvertently handed over £100 million to criminals.
They were caught in authorised push payment scams that are often sophisticated cons targeting clients of legal firms.
In an APP scam, a hacker intercepts emails between the lawyers and their clients. Even though office networks are protected, lawyers overlook encrypting their emails and send them in open text.
The hackers hijack the messages, change the bank details to one they control and then forward the message to the client who is expecting instructions to make a payment, typically for a house deposit.
The victim makes the transfer, which is immediately switched out of the country, and does not realise a fraud has taken place until the lawyer makes another request for the money some time later.
The official agency responsible for bank transfers, the Payments System Regulator has been working on a compensation scheme for victims for more than a year. The inquiry started after a super-complaint from consumer watchdog Which?
Without revealing details, the PSR announced their inquiry is making ‘good progress’ and that a revamped compensation scheme would be ready by September 2018.
PSR managing director Hannah Nixon cautioned that not every scam could be prevented.
“There is no silver bullet for APP scams, and some people will still, unfortunately, lose out,” she said.
“That’s why we’ve continued to look for a solution that could reimburse those who are scammed, and today we begin consulting on an option that we think could work.
Win for consumers
Consumers also need to consider an appropriate level of care to protect themselves.”
Another watchdog, the Financial Compliance Authority, has also looked at how banks and building societies avoid fraud.
The review disclosed many had ‘inconsistent’ procedures that did not readily detect APP fraud and that too little data was collected about the transfers.
Which? chief executive Peter Vicary-Smith said: “It’s good to see the regulator coming down on the side of consumers. If this stops the huge amounts of money lost to bank transfer scams, it’ll be a significant win.
“To make this a reality, the regulator must now ensure any reimbursement scheme properly compensates victims. Meanwhile, banks must move to quickly put in place better checks and protections to prevent these scams happening in the first place.”