-
Firms should consider retrospectively reimbursing
victims of push-payment fraud
-
Contingent Reimbursement Model should be
compulsory
-
24-hour delay on all first-time payments
needed
-
Firms missing Confirmation of Payee deadline should be
sanctioned
-
Targeted information campaigns needed for potential
money mules
-
Banks should be more transparent around
de-risking
The Treasury Committee has today published a unanimously-agreed
report on Economic Crime: Consumer View. The report was agreed
when was Interim Chair.
has since been
elected as the Chair of the Treasury Committee. has been the Committee’s
lead member for this inquiry and has therefore provided a quote
below.
Report Summary
In the first half of this year, over £600 million was stolen from
consumers. Economic crime is a serious and growing problem in the
UK. One method to combat it is Confirmation of Payee, which will
cross reference payee names with account numbers and sort codes.
If financial firms aren’t ready to introduce it by March 2020,
the regulators should consider sanctioning them. Another method
which should be introduced is a 24-hour delay on all initial
payments between accounts, providing time for consumers to
consider if they are being defrauded. When money is stolen, the
voluntary Contingent Reimbursement Model (CRM) is a welcome step
to set out how its signatories should reimburse money lost to
consumers by certain types of fraud. It should now be made
compulsory, and firms should consider retrospectively reimbursing
customers back to 2016. Regulators should define the term
‘grossly negligent’ to provide consistency on whether or not a
consumer is reimbursed.
Key Points
- Fraud is the
second most common crime type in England and Wales. There are two
main types of economic crime affecting consumers: authorised push
payments (APP), where the genuine customer processes a payment to
another account whist is controlled by a criminal, and
unauthorised fraud, where the account holder does not provide
authorisation for the payment to proceed and the transaction is
carried out by a third party. Both in terms of financial losses
and the variety of scams suffered by consumers, it’s clear
that economic crime is a serious and growing
problem in the UK. To ensure a clear picture of the
scale and types of economic crime facing consumers, the Financial
Conduct Authority (FCA) should publish data on economic crime.
- At present,
when a payment is sent, the initiator of the payment must give
the payee’s name, account number and sort code. The latter two
are cross referenced and confirmed with the receiving bank, but
the payee’s name is not. Confirmation of
Payee (CoP), which is set to be introduced in March
2020, involves the payee’s name also being confirmed. It’s a
serious failure that banks weren’t already doing this. The
regulators should consider sanctioning any firm that misses the
March 2020 deadline.
-
The Contingent Reimbursement Model (CRM)
is a voluntary financial services industry code which sets out
how its signatories should reimburse money lost to consumers via
APP fraud. The CRM is welcome and should now be made compulsory
in legislation. This won’t, however, provide any resolution to
previous victims of such frauds. Financial firms have been warned
since 2016 that they have been failing in their duty to protect
customers by not linking information on account names to
payments. Firms should strongly consider whether refusing to
retrospectively reimburse customers who relied on the payee name
is fair and just.
- Faster
Payments are an instant transaction which are normally processed
in seconds. Fraudsters rely on this speed to move money into a
series of accounts before consumers and banks are aware. Very few
first-time payments need to be received instantaneously.
Therefore, there should be a mandatory 24-hour delay
on all first-time payments, providing time for consumers
to consider if they are being defrauded. All future payments to
the same account could flow at normal speed. If an initial
payment was needed instantly, a customer could ring their bank
and additional checks could be carried out for the funds to be
released.
-
Money mules are individuals who allow their
bank account to be used to move criminal funds. In 2018 there
were around 40,000 cases that bore the hallmarks of money mule
activity. For example, it was reported that students were
selling their account log-in details to fraudsters who sought
to evade the strict checking procedures when individuals try to
open an account. Where groups of people who may be most
susceptible to being persuaded to become money mules are
identified, targeted information campaigns should be undertaken
e.g. banks should work with universities to provide information
for students.
-
De-risking is where a bank ends its
relationship with a customer it deems to be too high-risk. The
Committee has been told that whole sectors have had their
banking services withdrawn or refused in the first place
without explanation and no avenue to query the decision. Banks
must be as transparent as possible on de-risking to allow all
individuals and firms the best possible chance of keeping their
financial services. The FCA, which has at times appeared unable
to act to prevent de-risking from happening, and the Financial
Ombudsman Service should ensure that, where possible and
appropriate, instances of de-risking where a customer cannot
come to resolution with their banks are fully investigated and
banking services returned as quickly as possible.
- The
Committee has heard concerns about how law
enforcement has been dealing with economic crime, and
the lack of resources allocated to it. It is unacceptable that
victims of potentially devastating crime can have their cases
moved across law enforcement from pillar to post. It’s welcome,
therefore, that this is both a focus of the police, and its
inspectorate. It’s concerning that banks do not always appear to
be reporting instances to the police where, for example, the bank
has reimbursed the victim. The Government should require all
frauds to be reported regardless of their size, and whether or
not a financial institution has reimbursed a consumer. It is not
always clear to consumers whether a fraud should be reported to a
bank, the police or Action Fraud, nor is it always clear what
each entity would do with the information provided. This process
needs clarifying for consumers.
- When a firm
concludes that a loss from an unauthorised fraud was down to the
consumer’s own ‘grossnegligence’,
reimbursement is unlikely. Existing regulations don’t define
‘gross negligence’, allowing individual firms to set their own
bar of what customer behaviour it deems to be grossly negligent.
This could lead to a lack of consistency between how customers
with the same circumstances are treated. The regulators should
agree an accepted definition of gross negligence and require
firms to provide a list of ‘dos and don’ts’ for customers to show
how individual firms define proper account usage.
Commenting on the Report, , the Treasury Committee’s
lead member for this inquiry, said:
“With scams getting ever-more sophisticated, it’s clear that
economic crime is a serious and growing problem in the UK.
“The Treasury Committee’s report examines the scale of
economic crime faced by consumers, ways that financial firms are
combatting economic crime, how economic crime is investigated,
and consumer’s rights and responsibilities.
“To ensure that consumers are protected, it should now be
compulsory for financial firms to reimburse money lost to victims
of Authorised Push Payment fraud, and they should consider doing
so retrospectively.
“There should also be a mandatory 24-hour delay on all
first-time payments, allowing consumers time to consider the risk
that they are being defrauded.
“The Government and regulators should take on board all of
the Committee’s recommendations to enhance consumer protection in
the face of this harmful tide of criminal activity.”
--Ends--
Notes to Editors
· The
home page for the inquiry into Economic Crime is here.
This report is the second that we have published as part of this
inquiry. Our first – Economic Crime: Anti Money
Laundering Supervision and Sanction
Implementation – was focused on money laundering,
terrorist financing and sanctions in the UK as well as the
regulatory and legislative landscape.
