REVEALED: Plan to stop fraudsters vanishing into the ether with your cash

BANKS are working on plans to track down stolen money and return it to fraud victims within days.

They are setting up a new system that allows them find out where a payment has ended up — regardless of how many bank accounts the money has been moved through.

It means fraud victims will stand a far greater chance of getting back the cash they’ve lost.

Yesterday, new industry figures revealed for the first time the scale of bank transfer scams where con artists trick victims into handing over money.

In the first six months of this year 19,000 people were hit by this type of fraud, losing £101 million. Just £25 million, a quarter of the stolen money, was returned to customers.

Most victims are left permanently out of pocket because banks struggle to trace the stolen funds.

When a fraudster tricks someone into handing over cash, it is typically moved out of the receiving account and into another one within minutes.

From there it will be moved again and again through different accounts — known as mule accounts — with different banks.

It may be mixed with other money, some of which may be completely unrelated to crime, until it is almost impossible to work out where it originally came from.

The criminal will then withdraw the funds in cash, transfer the money overseas or use it to make a purchase.

At that point, your cash is usually gone for good — and banks won’t offer a refund — which is why it is vital to track it down before it leaves the banking system.

A new digital tracing tool, which banks are calling the ‘funds repatriation initiative’, will make this possible.

Brian Dilley, group director of fraud & financial crime prevention at Lloyds Banking Group, says: ‘The banking industry has been working together to develop a central system that enables us to trace and track the proceeds of fraud through the banking system.

‘Money stolen by fraudsters often exits the banking system and is long gone before people know they’ve been conned, but an infrastructure allowing banks to identify money quicker as fraudsters try to move it down the line will make it harder for them to get away with stolen cash and help victims get their money back.’

At present, when a victim of fraud contacts their bank for help getting their money back the bank can only see the first account the money was moved into. If the bank that received this money says it has already been moved out of the account there is little, if anything, they can do.

But under the new system the victim’s bank will be able to enter the payment details into a central computer that will show almost instantaneously every account the money has moved through since it was stolen — and crucially, where it ended up.

Once they know what bank has the money they can call and ask for it to be frozen so fraudsters can’t touch it again. If the case is simple and does not involve foreign bank accounts, the money could be transferred back to the victim within days.

In more complicated scenarios the bank may need longer to investigate to ensure the money is going back to the right owner.

Experts say this new system could protect significant numbers of customers and prevent millions falling into fraudsters’ hands.

As Money Mail has highlighted over the past two weeks, around £130 million has been frozen in accounts opened by criminals.

Often, this money has been abandoned by fraudsters after banks have become suspicious and flagged the account for investigation. In many cases banks are then unable to return the cash to the victim either because they can’t trace where the money came from or are prevented from touching it by onerous rules and laws.

Money Mail is campaigning for a tweak to the law so this cash can be used to pay back fraud victims who’ve been left out of pocket.

If the original victims can’t be found, banks should be allowed to use it as a compensation fund for other victims.

Barclays, HSBC, Santander, Nationwide and TSB have backed our campaign.

And over the past week Money Mail has convinced Lloyds bank to throw its full weight behind our proposals. Initially, it had suggested the money might go towards general efforts to tackle fraud rather than as compensation.

But now it says: ‘Lloyds fully supports Money Mail’s campaign to change the law and unlock all the £130 million in the frozen funds to compensate victims of fraud.’

If it was easier for banks to trace money through the system this money wouldn’t amass in the first place.

Writing for Money Mail today, Stephen Jones, chief executive of banking trade body UK Finance, says: ‘We need changes to the law to help stop the criminals in the first place, as well as helping victims get their money back.

‘That is why the UK banking industry welcomes Money Mail’s campaign.’

Banks have already begun piloting this new technology and are aiming to move into a second phase of testing early next year. They say that realistically the new system will not be fully up and running for another two years.

THErE are also questions around who will fund the system, how people’s data will be protected and if it will be mandatory for all banks and building societies to sign up.

There are also legal and data protection issues to consider.

For example, banks say that there needs to be protection in place in the event that they take money out of someone’s account to return to a victim and the owner of that account turns out to be innocent. For example, the criminal could have used the money to pay their rent. In this instance the bank can’t just take back the money from the landlord, who may be completely unaware they have been paid in criminal money.

There will also need to be a framework in place to deal with disputes when things go wrong.

Despite being a giant leap forward, the new system will not protect all victims, as it cannot stop fraudsters taking money out of the banking system altogether.

Yesterday, the Payment Systems regulator announced plans to force banks to reimburse people where firms ‘ have not met the required standards’ in protecting customers. It also wants to make it harder for criminals to set up bank accounts and is asking banks to share data so it’s easier to spot scammers.