Regulator mulls compensation for bank scams

Regulator mulls compensation for bank scams”

In December, the PSR said banks must do more to combat such scams. Banks have no duty of care to non-customers nor an obligation to share details.

Banks are not legally obliged to hand money back to customers who fall victim to transfer fraud, but that could change next year.

A proposal has been made to published data sharing standards and rules in the second half of 2018.

Campaign group Which? launched a super-complaint in September previous year urging the industry to better protect consumers; for banks to shoulder more responsibility for money lost to scams made by bank transfer and for the Payment System Regulator (PSR) to formally investigate the scale of this fraud.

Hannah Nixon, managing director of the PSR, said: "There are now a broad range of initiatives that will make it harder for criminals to commit APP scams".

The proposed model would set out the circumstances when victims of such scams would get their money back, and which bank or payment organisations should pay.

It previously said that in the first two weeks after launching an online scams reporting tool, more than 650 people told it about losing over £5.5 million in total to bank transfer scams. "That's why we've continued to look for a solution that could reimburse those who are scammed, and today we begin consulting on an option that we think could work", Nixon added.

The PSR's updated report was welcomed by Which?.

Chief executive Peter Vicary-Smith said: "A year on from our super complaint, it's good to see the regulator coming down on the side of consumers".

These scams are often performed through invoices, house purchase scams and email hacks to target people into authorising a payment via a bank transfer.

"To make this a reality, the regulator must now ensure any reimbursement scheme properly compensates victims".

These measures include improved data sharing between banks, new guidelines for identity verification, authentication and risk assessment, confirmation of the payee by customers, and transaction data analytics, which will allow banks and other payment organisations to shut down mule accounts used by fraudsters and find potential fraudulent payments.

Which?'s position was reinforced by a review of the way banks handle APP scams conducted by the Financial Conduct Authority that found banks' procedures were inconsistent, their existing fraud detection systems could not easily detect APP scams, and they didn't collect enough data.

It said it will be actively monitoring the adoption, implementation and impact of the standards.

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