In recent years, fraud cases in the UK have risen dramatically, leaving many consumers vulnerable to financial and emotional harm. According to the Financial Ombudsman Service, UK consumers lodged 8,734 complaints about fraud between April and June 2024. Shockingly, more than half of these were related to authorised push payment (APP) scams, where victims unknowingly approve payments to fraudsters.
A Significant Rise in Fraud Complaints
The number of fraud complaints is on the rise. In the same period last year (April to June 2023), the Financial Ombudsman Service recorded 6,094 fraud complaints. This increase is a clear sign that fraud prevention is lagging behind the evolving tactics of fraudsters. Several factors have contributed to this spike in complaints. Multi-stage frauds, in which consumers must deal with multiple firms due to the complexity of the scams, have become more common.
Additionally, there has been an increase in fraud cases where people unknowingly use their debit or credit cards to make fraudulent payments. These cases often involve professional scam operations that prey on unsuspecting consumers, leading to significant financial losses.
The Emotional Toll of Fraud
Abby Thomas, Chief Executive and Chief Ombudsman of the Financial Ombudsman Service stresses that fraud isn’t just a financial issue—it’s an emotional one. Falling victim to fraud can be a harrowing experience, leaving individuals feeling violated, embarrassed, and unsure of where to turn for help. Unfortunately, embarrassment often prevents victims from coming forward.
Despite the emotional and financial impact of fraud, the Financial Ombudsman Service has successfully recovered over £150 million for victims in recent years. This emphasises the importance of reporting fraud, as timely action can lead to a fraud refund, easing the financial burden on victims.
The CRM Code
The Contingent Reimbursement Model (CRM) code is a voluntary initiative designed to offer additional protection to consumers. Banks that have signed up to the CRM code are required to reimburse victims of APP scams unless exceptional circumstances apply. However, many consumers are unaware that not all financial institutions participate in this scheme.
Of the 4,752 APP fraud cases recorded in the first quarter of 2024, 2,734 were not covered by the CRM code. This means that a significant number of consumers had less protection when seeking a fraud refund. The data highlights a crucial issue: banks that don’t adhere to the CRM code are less likely to offer full reimbursement, as evidenced by the lower uphold rate of just 36%, compared to 49% for those that follow the code.
The Role of Financial Providers
Pat Hurley, Ombudsman Director for Banking, emphasises the need for vigilance as fraudsters continually refine their techniques. He points out that the Financial Ombudsman Service is currently handling about 500 fraud complaints each week.
Banks and other financial institutions play a pivotal role in fraud prevention. When they fail to act promptly or follow the necessary procedures, they increase the likelihood of a customer being defrauded. By learning from previous cases, financial providers can improve their fraud detection and prevention measures, potentially saving future customers from falling victim to scams.
Upcoming Rules for Faster Refunds
The Payment Systems Regulator (PSR) is introducing new reimbursement rules to improve fraud prevention and provide faster fraud refunds. These rules will apply to all financial providers, ensuring that customers who are victims of APP scams receive their refunds more quickly.
The new rules will cover scams involving up to £415,000, with a few exceptions, such as payments made to overseas accounts. The goal is to streamline the reimbursement process and make it easier for victims to recover their losses. This shift in policy could lead to a more robust fraud prevention framework across the financial sector.
Card Payments and Social Media Scams
A worrying trend in fraud awareness is the growing number of people falling for scams promoted on social media. Many of these scams involve fraudulent investment opportunities, where victims pay using their debit or credit cards. Unfortunately, card payments are not covered by the CRM code or the new PSR rules, leaving victims with fewer avenues for recourse.
Between April and June 2024, there were 1,500 complaints from individuals who used their cards to pay for investment scams. This figure represents a significant increase from the 1,100 complaints recorded in the same period in 2023. These numbers show the importance of fraud prevention strategies, especially when it comes to financial transactions conducted online.
Multi-Stage Fraud
Another rising concern is the prevalence of multi-stage fraud, in which stolen funds pass through several banks before they reach the fraudsters. This type of fraud is particularly common in cryptocurrency investment scams and ‘safe account’ scams, in which victims are cold-called by fraudsters posing as their bank.
Although banks have made strides in improving fraud detection, the success rate for victims seeking a fraud refund remains high. In the last quarter, the Financial Ombudsman Service upheld 44% of fraud complaints, compared to only 37% for other financial product complaints. This highlights the importance of consumers staying vigilant and acting quickly if they suspect fraud.
Protecting Yourself
Preventing fraud starts with being aware of common tactics used by fraudsters. Here are some practical fraud prevention tips:
- A legitimate bank or financial institution will never ask you to move your money to a ‘safe account’. If you receive such a request, hang up and contact your bank directly.
- Be wary of employment opportunities that require you to pay upfront. This is often a red flag for a scam.
- Before making any investment, especially those advertised on social media, research the company and ensure it is regulated by the Financial Conduct Authority (FCA).
Fraud awareness is your best defence against financial crime. Fraud awareness is more critical than ever, as these crimes have become increasingly sophisticated, leaving many victims without recourse. By staying alert and informed, you can reduce the risk of falling victim to fraud.
