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Payment scams – have the banks been let off the hook?

Monday 19th December 2016

Written by Martin Upton

The Payment Systems Regulator (PSR) has called for banks to do more to prevent scams where people are tricked into transferring money to fraudsters. But it has fallen short of requiring banks to compensate the victims. In making its recommendations the PSR was responding to a ‘super-complaint’ made by the consumer organisation Which?
 
The nature of payment scams can be quite simple, with fraudsters contacting victims and providing bogus account details for transfers of money. These frauds often take place at a time when people are expecting to make large transfers of money to people with whom they have not transacted previously – for example when paying a deposit on a property purchase. At times like this victims are particularly exposed to the machinations of the fraudsters. The PSR reports that hundreds of millions of pounds have been lost as a result of these scams.
 
Once the transfer has been executed the money cannot be recalled. Unlike similar scams involving credit cards, banks are not under an obligation to compensate the victims although they do pay up in around a third of the cases.
 
The PSR has required the banks to gather more data on these scams, work harder to identify potentially fraudulent payments and develop a common approach to such cases of fraud. But the failure of the PSR to go further has led to suggestions that the banks have got off lightly.
 
So what can people do to protect themselves from falling victim to payment scams?
 
The first line of defence is to take considerable care to check the authenticity and accuracy of the payment details (the bank sort code and account number) when setting up a new recipient on your online bank account. For example, for property transactions contact the estate agent or the solicitor involved and double-check the payment details. This simple double-check should identify whether you have been furnished with fraudulent information. 
 
The golden rule should be that details supplied to you – whether in a letter, text ‘phone call or e-mail – should not be assumed to be accurate unless independently verified. Apply caution particularly if there is only a scintilla of a reason to be suspicious. And of course you should never disclose your bank security details – your PINs and passwords.
 
In due course new online developments, including the introduction of ‘payee confirmations’, will enhance security and reduce the risk of being scammed. Until then make caution your byword when making online payments.
 
*Martin Upton is Director of the True Potential Centre for the Public Understanding of Finance (True Potential PUFin)
 





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Editorial Contact Details - Conor Shilling
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