APP fraud is now virtually free for the banking industry

The effects of fraud are not just financial. As with other crimes against the person, victims suffer from profound emotional distress – people are known to kill themselves. The victim-blame approach taken by banks is often a bigger contributor to their trauma than actual financial loss causes people deep trauma.

In the new world of open banking, authorized push payment fraud (APP), where a person authorizes a payment before realizing they have been scammed, has become industrialized, so since then 2019 UK banks have amassed £ 612million which has not been repaid to victims.

Banks argue – not without reason – that an account holder who authorizes and confirms the details of a payment is responsible for that payment, regardless of the outcome of the transaction: the bank provides the bank account with a fee or benefits in kind or at no cost to their clients. It is also reasonable for customers to trust banks to take care of their money and not to provide fraudsters with bank accounts. The 400,000 APP fraud cases since 2019 suggest their trust is misplaced.

Each bank has its own approach to the fight against fraud: a perfect environment for the fraudster to prey on the less prepared. Given the lack of economic impact for the banks, the other top management priorities are more pressing. A British bank – TSB – guarantees its clients against fraud and is a member of the Contingent Reimbursement Model Code (CRM Code).

The CRM code is supported by nine banks which account for 85% of the traffic on the UK Faster Payment real-time system. In the first six months of 2020, banks repaid an average of 40%, with TSB an average of 99% and two banks repaying less than 10%. Non-CRM banks have a significantly higher fraud percentage on their payment volume of 15% because they lack the resources of the largest banks. What the victim receives from a bank is a wide range of reimbursements sometimes nothing in the total amount.

Fraud continues to grow rapidly and is now one of the biggest forms of crime in the UK. Banks rightly argue that they alone cannot win the war of fraud – get the consensus of people, businesses, governments, big tech companies, law enforcement and law enforcement agencies. regulators take time and commitment.

The only thing that banks could The address is the simple fact that scammers need a bank account for APP scams to work.

To remedy the situation, banks – and all other payment service providers – need a consistent approach that recognizes that banks are not responsible for mistakes made by account holders by falling victim to fraudsters. . The
misunderstanding is that when there is a case, they provide all the details so that law enforcement agencies can track the money and quickly prosecute the fraudsters.

The UK’s payments regulator is currently reviewing comments from the consultation on APP and a response is expected by September 2021, which could proactively challenge scammers. It will also fuel the thinking behind the development of the planned new payment architecture, which will provide the opportunity to show the world that the UK, a global leader in real-time payments, is working to eradicate the APP fraud before it spread internationally.

Banks might even take the lead here – TSB can be cited as an example to its much bigger brethren – and recognize their role in how fraud works. Maybe they could ask their anti-money laundering team?

Or maybe you just remember all those phrases from police television series: “help and encouragement”, “obstructing the police in their investigations”.


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