Why financial fraud has become the most common crime in the country

At present, if you’ve unwittingly sent money to a bank account controlled by a fraudster, then most major banks have signed up to a voluntary industry code which instructs them to give your money back if you weren’t at fault.

But knowing how well each firm is at doing this has until now been something of a mystery, as banks have fought tooth and nail to keep the information out of the public domain. The upshot of that has been that victims have no idea if their bank complies with the code.

Last week the Payment Systems Regulator (PSR), the payments regulator, reported a set of data detailing how good a job major banks were doing. The results were staggering.

While TSB, which operates its own Fraud Refund Guarantee, which is separate to the voluntary industry code, led the way, refunding over 90 per cent of total APP fraud losses, only four signatories to the code - Barclays, HSBC, First Direct and Nationwide - could muster rates above 70 per cent - which hardly instils confidence for customers of those firms.

Reimbursement rates were startling, whether firms are signatories of the voluntary code or not. Starling, a signatory, only reimbursed 37 per cent of fraud. Monzo and Allied Irish Bank, two non-signatories, reimbursed 22 per cent and only 10 per cent, respectively.

The silver lining is that from next year the voluntary reimbursement code will give way to a mandatory system, where banks (along with over a thousand other payment service providers) will have to give victims their money back unless it can be demonstrated that they acted with ‘gross negligence’ - in other words, showed a very significant degree of carelessness.

But the concern is that, despite the positive steps taken by the PSR in introducing a fairer and more consistent system of reimbursement, it risks undoing that good work by bowing to pressure from the banks.

The PSR is proposing an excess on the value of scams - and has suggested values of either £100 or £250. By the regulator’s own estimates, setting an excess at £100 would mean almost a third of bank transfer fraud cases aren’t eligible for reimbursement, and at £250 the amount is around half. What incentive, then, would there be for banks to prevent relatively lower value fraud? Does this not open the floodgates for fraudsters to focus their attention on scams with a monetary value less than the excess?

Banks have become keen to point out that nearly 80 per cent of fraud starts online, so tech giants should also shoulder the burden of reimbursing victims. Thanks to Which?’s campaigning, tech giants will be forced to do more by taking legal responsibility for ensuring fraudulent content doesn't appear on their sites. The communications regulator Ofcom has the power to fine tech firms 10 per cent of their annual turnover, meaning there’s a genuine incentive for them to up their game.

As the PSR’s reimbursement figures lay bare, there needs to be financial incentives for banks to protect people from scams. The regulator must hold firm against industry lobbying and introduce a system of reimbursement that’s fair and consistent.