Pay back the fraud victims

There’s £130million in frozen bank accounts once used by fraudsters, And, with a simple change in the law, it can be used to compensate victims

BANKS are sitting on a secret £130 million cash pile that could be used to refund fraud victims.

This money has been frozen in accounts opened by criminals who run convincing scams to dupe customers out of their life savings. Banks say that they have been unable to return the cash to the rightful owners because of onerous rules.

As a result, the cash is just sitting in defunct accounts doing nothing.

Today, Money Mail calls for the frozen funds to be shared out among fraud victims left out of pocket.

Over the past year, we have repeatedly warned that banks offer customers almost no protection against con artists.

Banks routinely refuse to cover losses when customers are tricked into transferring money or giving their details to fraudsters. In some cases, victims have lost more than £100,000.

The scams are so sophisticated that they can be incredibly hard for ordinary people, busy with their lives, to spot.

Banking bosses say they would use the £130 million in frozen funds to pay compensation to innocent victims — but their hands are tied.

Crucially, they say they cannot act until the Government changes the law.

That’s because legal requirements make it extremely difficult for firms to seize money from any account — even if it is being used fraudulently — without going through the courts.

However, senior banking industry sources and civil servants have told Money Mail that this hurdle could be overcome with an amendment to an Act of Parliament covering money laundering.

A spokesman for UK Finance, which represents the banks, says: ‘Millions of criminal profits are currently frozen by banks. We want to do more to help our customers, but the law needs to change.’

It says that £130million is a conservative estimate of the amount of money that could be refunded to victims.

Last night, MPs, charities and consumer groups backed our call to use the money as a fighting fund to repay the fraud victims.

James Daley, director of consumer group Fairer Finance, says: ‘A compensation fund for fraud victims is long overdue. The stakes are too high to allow the victims of what are usually very sophisticated scams just to lose their life savings.

‘This is a growing problem and, if we don’t find a way of refunding consumers, they could lose confidence in the entire banking industry.’

Martyn Day, a former banker who is now MP for Linlithgow and East Falkirk, says: ‘People have been conned. It is irrelevant

whether they have sent the money hemselves or had it taken out of their account by fraudsters. ‘They have been ripped off and should get some compensation. In many cases, people have lost a life-changing sum, so if they could get even just a small part back, it would help.’ Caroline Abrahams, charity director at Age UK, says: ‘We would like to see a long-term solution to this problem. Meanwhile, it is time to see what can be done to compensate the victims.’ Banks almost always cover fraud on your account if you were not at fault. This includes where someone clones your credit card and goes on a spending spree. However, firms are under no obligation to offer a refund if you authorised the fraudulent transaction yourself, handed details to crooks, or allowed them to access your computer or accounts. This applies even if you were duped by a con artist. Banks class this as ‘gross negligence’. Scams where you’re left out of pocket include where someone telephones you claiming to be from your broadband company, bank, or even the police, and asks you to make a payment or hand over passwords or codes. The same applies if you send an account number given in an email sent by a crook masquerading as your solicitor or builder. And banks don’t offer refunds for fake deals on shopping websites if you pay by bank transfer, rather than debit or credit card.

There are no official figures on how much money has been lost to this type of fraud.

Some of the cash ends up lost in the system or withdrawn by crooks. The rest gets ‘frozen’ by banks when they discover a suspicious account.

Banks can put a fraud flag on an account if they are concerned it may be connected to crime.

They simply file a ‘Suspicious Activity Report’ with the National Crime Agency (NCA). This stops any payments going in or out. The NCA then has up to 38 days to investigate.

If law enforcement officers find enough evidence, they can take the case to court.

The money can be seized through a confiscation order if a villain is convicted. The bank must then identify the victim who was defrauded. This person then has to apply to the court to be reimbursed. If a victim cannot be found, the cash goes to the Government.

However, only a tiny percentage of fraud cases are taken to court. Most of the time, the NCA cannot gather enough evidence to prosecute anyone.

Often, crooks realise they have been rumbled and simply abandon their cash, disappearing into the ether.

To return this abandoned money to its rightful owner, a bank needs a judge to decide who that person is via a Court Order. This is not easy if the money was taken from a series of different victims.

The search is made doubly difficult because of the way fraudsters cover their tracks. Crooks frequently pass stolen money through various accounts and different banks to avoid detection — sometimes sending it overseas.

Banks say data protection rules often stop them sharing some of this vital information.

Around £130 million is sitting idle in frozen accounts on which the banks have given up.

Money Mail understands that, to free up this money, the Government would need to amend the Proceeds of Crime Act 2002 or the Criminal Finances Act 2017. A change to either of these laws would enable banks to release the frozen cash into a central fund.

For victims to be compensated, the Government would need to write another law, giving banks permission to access that pot of money.

If there is not enough cash to cover full payouts to all fraud victims, officials will have to work out who gets what.

But even if victims don’t get every penny back, £130million would go a long way to easing their despair.