Conal Gregory: Beware the fraud minefield as £845m lost in banking scams

Frequently, bank and building society accounts are opened using false information
Frequently, bank and building society accounts are opened using false information
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Whilst fraud has always been present in society, it has now reached monumental proportions and made so many innocent investors worried as to how to transact safely and then safeguard assets.

The police and other authorities struggle to keep up with the constantly changing forms of criminal deception to gain information, open accounts and steal. William Shakespeare rightly recognised this in his comedy Much Ado About Nothing of 1598/99 with his quip, “The fraud of men was ever so”.

Frequently, bank and building society accounts are opened using false information. Almost £845m was lost in banking scams last year. In July, the five largest banks and one building society, Nationwide, joined forces by putting £6.5m into countering suspicious activity on accounts.

Sadly, many financial service companies are dragging their heels about signing up to a voluntary compensation code which will reimburse victims who can prove they have not been reckless. However, together with Government agencies, more success is being achieved in recovering assets with £1.6bn obtained in 2010-18.

Using a cash machine is still not fraud-free. Sometimes a card can be inserted and the transaction fails with no cash dispensed. When this occurs, the normal route is for your card provider to ask the ATM operator to check if there has been a discrepancy in the money paid out.

If this is not the answer, ‘cash trapping’ may have occurred when a fraudster tampers with the ATM to stop the money being dispensed, which they collect after the card holder has gone.

Two other useful tips are to use your hand to shield fingers when inserting your code and, after withdrawing cash, touch all numbers so that a heat pad cannot discover which four have been touched.

Financial providers are moving from one-time passwords to ‘static’ ones which means when a purchase is made online, the website technology will forward a unique password to a mobile telephone which then needs to be inserted to confirm your identity. This process is designed to give more security.

If cold-called on a money matter, delete the internet message or immediately end the call. The practice is now illegal. Wealth managers can be impersonated, particularly when a company is to be floated, with an offer to submit a client’s application.

‘Ghost’ broking is one new trick. Scammers pose as genuine insurance brokers and offer cheap cover. Students, taxi drivers and recent arrivals to the UK are their targets.

They quote an area with very low incidents instead of the actual high risk address of the applicant and issue doctored documents whilst the correct policy documentation goes to an unsuspecting home.

Criminals manage this fraud because few insurers check the personal details of a motorist at the application stage. Frequently, no verification takes place until a claim is made.

In the event of a motor claim, there is no cover. If purchasing from an insurer, check their membership with the Motor Insurers’ Bureau or, for an intermediary, see if they are registered with the British Insurance Brokers’ Association.

Aviva found around 16,000 application frauds last year of which half were ‘ghost’ broking.

Today, 20 per cent of purchases are made online, presenting a great opportunity for cybercriminals. Before carrying out monetary transactions online, always check for the ‘padlock’ symbol on web addresses to indicate security.

Even genuine ISA providers have been hacked. It is easy to make the mistake of opening up such a website which even shows the same wording and symbols. The FCA lacks the power to remove such bogus offers but has to request Action Fraud. Payments made to a fraudulent firm in such a case cannot be refunded by the Financial Services Compensation Scheme.

‘Phishing’ can be persuasive. This is where a criminal sends an email from what purports to be a legitimate source and asks for personal information.

Reviews online should not be taken at face value. In July the consumer champion, Which?, revealed that Amazon’s website had a massive number of fake five-star reviews even though invented and misleading reviews are illegal under consumer law.

Look for reviews marked as ‘verified’ to see where Amazon can confirm a product was purchased on its website.

Weddings form a major area for scams. It is so tempting for fraudsters that potential suppliers need to be thoroughly checked before parting with deposits.

Barclays have found that one-fifth of wedding photographers, 16 per cent of florists and even 16 per cent of wedding planners did not exist. The bank urges references to be taken up, confirmation agreements to be put in writing and reviews online considered.

Social media is used by fraudsters to contact teenagers and youngsters in their early twenties with the lure of high returns and the promise of a luxury lifestyle. They use sites like Instagram and Snapchat, according to the challenger bank, Monzo.

When contacting a financial adviser, check they are authorised by the Financial Conduct Authority: fca.org.uk. In the past it was possible to see a person’s financial qualifications but the regulator has withdrawn this helpful information. If an adviser claims to work for a particular firm, contact a senior person at that organisation to verify the position.

Take special care over newly created firms. They may be set up by a financial adviser who has got into difficulty and to avoid penalties has been declared bankrupt. The industry calls this process ‘phoenixing’.

The pension freedom of not having to buy an annuity for retirement has unfortunately opened the door to criminals who often start by offering a complimentary review.

They use a legal loophole, known as a ‘fractional’ scam, where a retiree is persuaded to take the money held in a company pension scheme and place it in non-traditional investments whilst high fees and administration charges are imposed.

The alternative financial destinations include car parking spaces, credits to offset carbon emissions, tree plantations and yacht hire. The more novel, the more appealing many such offers are to the gullible because of the high profits promised.

Holiday locations form a popular scam subject, costing victims over £7m in 2018. Fraudsters take online photographs and details from estate agents and offer properties, either for rental or sale.

Ensure no money is sent directly, such as a bank transfer, but only via a recognised portal such as a credit card. Paying with a credit or debit card brings protection through the respective Consumer Credit Act 1975 (section 75) or chargeback scheme.

If buying a second-hand car, check the details with the DVLA’s motor enquiry service which is free to use. Then contact HPI (Hire Purchase Information) in Leeds to ensure there is no outstanding debt.

There are increasing incidents of victims who have been duped into believing conmen are police officers who are investigating the sale of counterfeit goods.

They are tricked into withdrawing cash and buying expensive articles such as high-end watches which are then passed over to the criminals. Action Fraud says almost 900 cases occurred last year with £5.4m stolen.