At last: bank watchdogs will come to scam victims’ aid

Victims of bank transfer fraud will be buoyed by a raft of proposals to support those who fall foul of the growing problem. Hundreds of thousands of cases of bank transfer fraud are reported every year and the number is growing. Action Fraud, the national centre for reporting scams, recorded 43,875 cases in 2017, with victims losing £236m.

All too often victims find themselves left out in the cold by their own bank and by the one used by the criminal to accept the transferred money. But under new proposals they will be able to complain to a bank or building society even if they are not its customer.

This is significant as in most cases of bank transfer fraud your own bank simply follows your instructions, whereas the recipient bank is the one that allowed a scammer to open an account, potentially in breach of regulations if it failed to spot false or forged credentials.

This week Mark Thompson, head of the Serious Fraud Office, told MPs that senior bankers weren’t doing enough to prevent money laundering. Telegraph Money has long campaigned for action to force banks to reimburse the innocent victims of crime.

Among those who might have benefited from the new regulations is Adrian Lear, who was duped into sending more than £4,000 to a scammer who posed as a seller on eBay. Mr Lear, a 48-year-old builder, found a Volkswagen T4 van listed for £4,600 on the auction website in 2014, but when he contacted the seller they asked to take the transaction away from eBay and requested the money by bank transfer.

Mr Lear transferred the cash and travelled 145 miles from his home in Pontypool, south Wales, to London to collect the van. It was only after he got to the given address, finding no van and a resident who had never heard of any transaction, that he realised he had been scammed. He reported the crime to his bank but it was too late – the money was gone.

TSB, the fraudster’s bank, initially refused to help. Now, following Telegraph Money’s involvement and four years after the crime, it has paid Mr Lear £6,000, the full amount plus interest. But the bank still insisted that its procedures had been followed.

A spokesman said: “Although we cannot find any evidence that our account opening procedures were not followed correctly, in the interests of resolving Mr Lear’s case without further upset or delay we have decided, as a gesture of goodwill, to fully refund him.”

The Financial Conduct Authority (FCA), the City watchdog, is consulting on proposals that would allow victims to make a claim from a bank of which they are not a customer. Final recommendations are due before the end of the year.

This would mean that if they could prove a bank had been negligent and breached the regulations when it allowed the fraudster to open an account, they would have the right to file a complaint and ultimately take the case to the Financial Ombudsman Service for arbitration. This would potentially allow those in Mr Lear’s situation to get a quicker resolution.

The Payment Systems Regulator (PSR) is currently working on an agreed model for when banks should pay out to customers. This would set out clear guidelines on what responsibilities financial institutions had to customers who had been victims of fraud.

Banks would be forced to compensate victims if they had not met the “required standard” of care and the customer had taken the “requisite level of care” or could not have “reasonably” prevented the scam. The PSR’s rules would be in place by September.

This is good news for victims, but Jack Buster, who runs a fraud recovery service, said he was unconvinced. He has spent years liaising with the FCA, the ombudsman and the banks on behalf of victims and been given short shrift.

He said bank transfer fraud could ruin lives and banks needed to do more to comply with money-laundering regulations. “It is absurdly easy for criminal gangs to open bank accounts using forged ID and forged supporting documents,” he said.

“Generally speaking, banks simply accept these forgeries without any form of independent verification despite money laundering regulations that state that they must always do so. Any bank that fails to comply must be liable for any losses incurred by those who pay into fraudulently created bank accounts.”

A spokesman for UK Finance, the banking trade body, said tackling scams was a priority and it supported the PSR’s work.

Two separate regulators give victims more power to win redress after fraud. Sam Meadows reports

Adrian Lear lost £4,600 to a scammer while trying to buy a Volkswagen van