ROSS CLARK: Banks MUST pay out to those who are scammed

ROSS CLARK: If banks are forcing us all online, they MUST pay out to those (like me) who are scammed

Once, British banks were regarded as solid and dependable institutions, staffed by responsible people who would guard customers’ savings as they would their own, come famine, flood or war.

What was left of that image was destroyed in the 2007/08 banking crisis — symbolised by the queues of people outside Northern Rock branches desperate to get their money before the bank went bust.

A string of banking failures would have followed had not ministers propped them up with taxpayers’ money.

But even that shameful episode doesn’t make me think as badly of the banks as their latest wheeze: trying to wriggle out of refunding customers who have fallen victim to high-tech, cunning scams.

ROSS CLARK:As fraud has proliferated and the number of victims grown, banks did seem to have some sympathy with their plight (stock)

Tricked

All of us are vulnerable to such scams. Take Laura McGauran and her husband who were about to exchange contracts through Lloyds Bank on a house purchase in Surrey. 

They were tricked into sending their £120,000 deposit to a bogus account after fraudsters hacked into their solicitor’s email account.

Or former BBC presenter, Helen Skelton, who had £70,000 whipped from her account after criminals posed as her bank’s security team to steal her account details. 

Both were denied refunds after their banks ruled that it was they who were at fault. According to Laura McGauran: ‘My husband and I were treated as if we had brought it on ourselves.’

That is an attitude shown to thousands of others who have lost serious amounts of money — in some cases their life savings — because of a lapse of judgment or the failure to spot a sophisticated crime.

In 2019, according to banking trade association UK Finance, what are known as ‘push-payment frauds’ involved a total of £455 million, a rise of 29 per cent on the year before. Yet only £116 million of this was refunded to customers.

The year before, a total of £844.4 million was stolen from UK customers through combined banking, online or card fraud — a 16 per cent increase on the previous year. 

As fraud has proliferated and the number of victims grown, banks did seem to have some sympathy with their plight.

In February, a temporary funding arrangement for a scheme that reimburses innocent consumers tricked into transferring money to fraudsters was extended to the end of this month.

At the time, UK Finance said that this ‘refund code’ would give the Government, regulators and the banking industry more time to develop a ‘long-term, sustainable funding arrangement’ for the scheme.

But the arrival of the coronavirus and two national lockdowns has sparked an epidemic of fraud, with bank customers conned out of a staggering £1.4 billion since March.

And while Covid restrictions have forced millions more people to shop, make payments and manage financial affairs online, little has been done to counteract the scams or help those who have lost out.

Indeed, the only bank that guarantees to refund ‘innocent’ victims in every case is TSB.

Now it emerges that seven of our biggest banks are reported to be in private discussions about rescinding the voluntary agreement so that they stop paying out refunds for the most common type of fraud.

They want to tear up existing rules that guarantee online shoppers their money back if they are scammed. It would mean that an estimated 90,000 claims a year involving some £67 million would be instantly rejected. And we can be sure that’s only the start.

Push-payment fraud victims already struggle to even get heard by their banks, which argue that it is not their fault if the customer fails to check that the person they were paying was genuine.

And, yes, sometimes people could have been more careful and taken extra precautions.

But in many cases the scams are cunning and convincing in the extreme, involving, for example, scammers persuading customers that their telephone is connected to the bank’s security hotline or that they are calling from HMRC, or NHS Test and Trace.

ROSS CLARK:Push-payment fraud victims already struggle to even get heard by their banks, which argue that it is not their fault if the customer fails to check that the person they were paying was genuine (stock)

Even if people have been foolish and gullible, it is surely callous to blame them.

For many bank customers, especially the elderly, online banking is a frightening business which they have been forced into by bank branch closures and the loss of high-street ATMs. 

Some are so ashamed of falling victim — and no doubt hold out so little hope of being refunded — that they fail even to report fraud.

So why is victim-blaming still considered acceptable by banks when it comes to fraud?

Banks might maintain that it is nothing to do with them if fraudsters make cold calls posing as members of a bank security team or hack into a solicitor’s email account. But I’m sorry — it is very much their business to prevent such crime.

The banks control the system of electronic payments. For a fraudster to steal money through the banking system, it is necessary for them either to open an account or to seize control of someone else’s.

Victims

Surely, all these payments leave an electronic trail — one which, if properly followed, would lead back to the fraudster.

That is what we are told when the banking and payments industries try to persuade us to stop using cash and switch entirely to electronic forms of payments — indeed, fighting crime is one of the main arguments used.

Why then are banks allowed to throw their arms up and tell victims of fraud that they can’t retrieve their money because it has gone?

I would say that if they can’t find your money, they aren’t looking hard enough. It is absurd that criminals are being allowed to exploit the banking system so easily.

Try opening a new account with a High Street bank and you’ll need at least three forms of identification.

And yet fraudsters seem to have no trouble at all opening accounts or making use of innocent customers’ accounts.

True, a lot of the money stolen from British scam victims will be rapidly whisked abroad. But we live in a ‘globalised world’ and banks can surely talk to each other across borders.

Any country which refuses to co-operate with tracing fraudsters should be frozen out of the international banking system.

It certainly shouldn’t be left to voluntary agreements for banks to refund the victims of fraudulent transfers.

Checks

Banks should be held legally liable for enabling those transfers to take place. If they were, you can bet that online and banking fraud would quickly reduce.

It isn’t just the banks who can’t be bothered to get on top of it. The police, too, seem to be absolving themselves of any responsibility.

When I was scammed by a hotel — or bogus hotel — in Devon recently, local police did little more than direct me to a helpline called ‘Action Fraud’, which is run by the City of London police and is interested in little more than collecting statistics.

Has there ever been such a misnomer? I never heard back from them.

Online banking undoubtedly makes life more convenient. But that convenience should not come at the price of losing, in some cases, life savings.

Banks should be legally obliged to refund any money lost as a result of fraudulent use of the bank accounts and payment systems that they operate.

If that means extra checks having to be made when we make large payments, that would be a lesser evil than having what we have now: a payment system which has been mastered by criminal gangs capable of spiriting away our money in an instant, never to be seen again.

What we need for our banks is a legal duty to ensure they are not unwittingly aiding and abetting crime — and then leaving their customers to count the cost.

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