Victory for fraud victims as banks forced to act

A forthcoming code to help victims of bank transfer fraud could already be paying dividends, discovers Sam Meadows

suggest that, although HSBC felt it had carried out all the necessary checks – and satisfied current requirements – it had chosen to issue a refund ahead of the introduction of a reimbursement code that is likely to broaden the responsibilities of banks substantially.

By the end of September, the Payment Systems Regulator is due to publish a set of rules on when victims of bank transfer fraud should be reimbursed.

Currently fraudsters’ banks are obliged to pay the victim back only when it can be proved that they failed to take reasonable care in checking documents, even if those documents are false. It appears that the code will force them to take more responsibility and make it far harder to wash their hands of victims’ losses.

Although the new reimbursement code will not be formally adopted until January, the ombudsman will be able to take it into account immediately when making decisions, meaning that most institutions are expected to follow it.

Bank transfer scams are among Britain’s fastest-growing crimes. Figures from UK Finance, a trade body, released earlier this year showed that £236m was lost to this type of fraud in 2017 – with only £60.8m refunded to victims.

Criminals trick victims into transferring money, often posing as a solicitor or financial adviser and stealing cash intended for a house deposit or retirement fund. The consequences can be life-changing.

This newspaper has campaigned for banks and building societies to take greater responsibility for their role in these scams. But those who seek refunds currently face maddening inconsistencies, with some banks agreeing to refund a victim in circumstances in which others do not.

Telegraph Money understands that the PSR’s code will lay out detailed criteria for victims’ banks that will require them to give “specific warnings” on suspicious payments, identify out-of-character activity and protect customers they know to be vulnerable.

A spokesman for the PSR said: “The code will set out what is expected of both industry and consumers to reduce the occurrence of scams and the circumstances for when consumers should be reimbursed. This will give everyone greater protection against this type of fraud – and victims a much better chance of being reimbursed.”

In designing its reimbursement code, the PSR set up a steering group of banks, building societies, consumer rights bodies and charities, with discussions now entering their final stages.

In a meeting last month the group reiterated its commitment to the principle that a victim who had taken reasonable care should be reimbursed – whether their bank was at fault or not. However, the minutes note that there is no agreement yet on where the funding will come from