Proposed Use of Criminal Cash to Refund Scam Victims

A story that comes with something of a feelgood factor – if it becomes reality.

The government is currently considering a proposal which is being promoted by leading banks, where criminally obtained funds are recovered from scammers and used to directly refund scam victims.

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A YouGov survey carried out by the banks, showed that 75% of those asked, said they supported the idea (why wouldn’t they we wonder?), but the hole in consumer pockets is so large that those recovered funds wouldn’t really make a dent in the size of the problem.  With estimates for total fraud of this kind in the UK reaching £1.2 billion in 2020, the amount held in these frozen accounts of criminals is only £130 million.  We also know, from all the research we cover at IPS, the true scale of these crimes is almost certainly far greater than the estimates because victims are often too embarrassed or ashamed of admitting their mis-judgements or talking about the situation they find themselves in, even to their friends and loved ones.

Banks and bank transfer scams

In 2019, nineteen UK financial institutions signed a voluntary code of conduct to ensure that victims of scams and frauds would be refunded by their banks.  The refunds were to be easy-to-access if the individual had not done anything wrong or was complicit in the wrong-doing.

Sadly, the burden of proof has continued to lie too heavily on the victim, who is usually in a distressed state whilst endeavouring to deal with all of the fallout from their loss – sometimes alone without any institutional or family support.

A 2021 review by the Lending Standards Board (LSB) which regulates the 2019 code has found that banks routinely failed scam victims even though the code of conduct set out how they should detect, prevent and respond to fraud victims.  The LSB goes as far as to accuse the organisations of unfairly blaming customers along with providing inconsistent information and exceeding time limits for addressing reports from victims (which should be within 15 days).

A statement made by the banking trade body UK Finance, outlined that banks work hard to protect customers from fraud and scams and to identify vulnerable customers.  They have also suggested that anyone setting up a bank transfer is able to choose to schedule that payment for a later date, giving that person time to think, also speak to a trusted friend or relative, even the bank itself.

The LSB urged banks to immediately address its recommendations to prevent bank account holders becoming scam victims.

Which? magazine supports those actions and calls out seven actions that would help us all.  You can read the article here.

  • Force banks to publish the numbers of scam victims they have within their customer base, what actions were taken and what reimbursements they received. This information may help customers decide which banks should manage their money.
  • Make the voluntary code mandatory to give it real teeth. It should no longer be ‘nice-to-have’ compensation for blameless fraud victims and banks who don’t follow-through on their volunteering to do so should be called out in public
  • Banks should deliver a prompt service and let customers know how their case is progressing during these often turbulent and life-changing moments.
  • Don’t force the customers to do all the work and stop interpreting all the rules in the banks favour so it always looks like the victims should have taken more precautions and been more of an expert. If the victim was innocent and blameless it is unfair to dodge the responsibilities set out in the code.
  • Banks should provide requested and consistent information. Training should be better and the decision making process should be more transparent.
  • Banks should do more to understand customer vulnerabilities and show more understanding of the individual circumstances behind certain losses.  Customer service should be more empathetic when listening to these stories.
  • Use criminal cash to reimburse victims as our headline described.

On 12 July 2021, the government and banking trade body UK Finance published a plan to protect the public and private sector from economic crime.

The report states that “The government is also working with the financial sector to unlock suspected criminal funds held in ‘frozen’ accounts across the financial sector…We will consider how these funds could be used, including whether suspended funds can be used to reimburse victims of fraud.”

IPS View

With all our digital vulnerabilities being exploited by criminals during the pandemic it is important the banks stay focused on helping their customers, especially when they are cutting costs by closing branches and reducing headcount.  There needs to be intelligent use of technology and automated processing to make alerting your bank that much easier and less unpleasant.
If you notice any unexpected activity inside your bank account you must alert your bank quickly to give them the best chance of finding out what has happened.
If your bank has signed up to the code (actually called the Contingent Reimbursement Model Code for Authorised Push Payment Scams) then they should offer you your money back provided you’ve paid attention to any warning information the bank flagged during the transaction.
If you are not happy with their performance you can always lodge a complaint with the financial ombudsman.
For additional protection of your personal information find out more about IPS 360 Protect.

Have your say

As an IPS member, you can leave us your thoughts, comments and experiences in the commments section below

One Response

  1. dfhulme says:

    I would like all banks to allow us to set up a Special Savings Account which was 100% safe against scammers. By that I mean that monies are not released from that account without concrete proof of my identity. It would be my responsibility to transfer monies into that Special Savings Account but not even I could withdraw funds without special action in conjunction with the bank. I would then feel safe that, even if my account was compromised, the vast majority of my funds would be safe and they were 100% the bank’s responsibility.

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