UK Finance calls for cross-sector collaboration to stop APP scams, as industry announces new funding arrangements for ‘no blame’ cases

UK Finance is today announcing a change to the process of reimbursing so-called ‘no blame’ cases of authorised push payment (APP) scams under the voluntary industry Code, bringing in a simplified process which enables signatory banks to individually pay back cases rather than through a shared central pot. This new process comes as the industry renews its call for a comprehensive, multi-stakeholder approach to tackling the root causes of these scams.

Effective today, the new process will mean individual banks oversee the end-to-end reimbursement process for APP scams and reaffirms the industry’s commitment to a fair outcome for victims of ‘no blame’ cases. Today’s changes will not impact customer reimbursement, and no victim of a ‘no blame’ APP scam will lose out.

The new framework only applies to the financial institutions which have signed up to the APP Voluntary Code and their customers.

APP no blame scam cases were previously funded through an interim arrangement, where seven banks and building societies provide funding into a central ‘no blame’ pot – with the signatory banks directly refunding customers in such cases, and then claiming it back from the pot.

APP scams occur when people are tricked into authorising a payment to an account that they believe belongs to a legitimate payee – but is in fact controlled by a criminal. In ‘no blame’ cases, both the customer and the bank did everything expected of them under the Code, but the criminal is still able to carry out the fraud. Criminals do this by bypassing both banking security systems and customers’ due diligence by exploiting vulnerabilities outside the control of the financial sector, such as fake investment adverts on online platforms.

UK Finance data shows criminals are increasingly exploiting online platforms to carry out fraud, with the rise in online-enabled scams especially notable throughout the Covid-19 pandemic. Multiple lockdown restrictions have meant a shift in the way people have lived their daily lives with growing use of digital platforms. Criminals have adapted scams to mirror these societal shifts, harnessing tech platforms to prey on victims.

The banking and finance industry is investing millions in advanced technology to protect customers from fraud while working closely with government, law enforcement and sectors like telecoms to stop the criminal gangs. However, a more comprehensive approach - which includes the tech and online sectors – is urgently needed.

With this as a backdrop, UK Finance is strongly advocating to the government to include economic crime in scope of the Online Safety Bill. This would make tech companies responsible for protecting consumers from the threat of fraud and reduce the opportunity for criminals to target the most vulnerable people with scams, as well as tackling crime which finances terrorism and child sexual exploitation and abuse.

Katy Worobec, Managing Director of Economic Crime at UK Finance, said:

“The interim funding pot was originally set up because we had asked that government and regulators work with industry to find a long-term solution to funding of ‘no blame’ cases, involving other sectors like online platforms, which are used by criminals to perpetrate the fraud, contributing to reimbursing the customer. Sadly, that is yet to happen.”

Detective Chief Inspector Gary Robinson, head of unit at the Dedicated Card and Payment Crime Unit (DCPCU), said:

“We would welcome opportunities to partner more closely with the online platforms. Recent collaborations with social media and telecommunications companies enabled the DCPCU to successfully take down 731 social media accounts linked to fraudulent activity, of which 258 were involved in recruiting money mules.

"Everyone should play their part in helping tackle fraud, including members of the public who are reminded to protect themselves by taking a moment to stop and think before parting with their money or information. Contact your bank immediately if you think you’ve fallen for a scam."

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Notes to editors

UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation.

1. The seven signatories who contributed to the ‘no blame’ pot are: Barclays Bank UK PLC, HSBC UK Bank plc, Lloyds Banking Group, Metro Bank plc, Nationwide Building Society, National Westminster Bank Plc and Santander UK plc.

1. In May 2019, a voluntary Code to help protect customers from authorised push payment (APP) scams was launched. The Code, jointly developed by the banking industry and consumer groups, was launched on 28 May 2019 and sets out increased consumer protection standards to help protect customers from APP Scams. Payment service providers that have signed up to the Code commit to:

• protecting their customers with procedures to detect, prevent and respond to APP scams, providing a greater level of protection for customers considered to be vulnerable to this type of fraud;
• preventing accounts being used to launder the proceeds of APP scams, including procedures to prevent, detect and respond to the receipt of funds from this type of fraud; and
• compensating customers if they fall victim to an APP scam, provided they did everything expected of them under the Code.

1. Nine financial institutions, representing 19 brands, are signatories to the authorised push payments scams voluntary Code:

Barclays Bank UK PLC

Barclays

The Co-operative Bank plc

Co-op

Smile

HSBC UK Bank plc

HSBC UK

First Direct

M&S Bank

Lloyds Banking Group

Lloyds Bank plc

Halifax

Bank of Scotland plc

Intelligent Finance

Metro Bank plc

Metro Bank

National Westminster Bank Plc

Royal Bank of Scotland plc

National Westminster Bank Plc

Ulster Bank (Northern Ireland)

Nationwide Building Society

Nationwide

Santander UK plc

Santander

Cahoot

Cater Allen Limited

Starling Bank

Starling