Recorded incidents of digitally enabled financial fraud and scams across the UK have hit their highest ever level, with consumers lodging a total of 8,734 complaints and with over half relating to customer-approved online bank transfers – also known as authorised push payment (APP) scams – in a three-month period, according to the Financial Ombudsman Service (FOS).
The OFS data, which relates to the three-month period from 1 April to 30 June, is a stark increase on the same timeframe last year, when it registered 6,094 complaints. Thanks to significant underreporting – often people are afraid or ashamed to admit to being caught out – the true numbers for both periods are likely far higher.
It said that the jump in the figures could be attributed to several factors, including more elaborate, multi-stage fraud cases, which can lead to multiple claims from the same victim due to the number of firms involved, a growth in people inadvertently using credit or debit cards to pay fraudsters, and more online fraud cases being brought by professional representatives.
FOS chief executive and chief ombudsman Abby Thomas said: “Being a victim of a fraud and scam is a horrendous experience – not just financially, but emotionally too. That’s why it’s disappointing to see complaint levels rising to even higher levels.
“We often hear from people embarrassed to have fallen victim to a fraud, but these crimes can be complex and incredibly convincing, and nobody should be afraid to come forward.”
Thomas said that over the past few years, the FOS has returned over £150m to victims in thousands of instances. She added: “No matter how complex a case is, people can come with confidence to our free, independent service and we’ll investigate their complaint.”
The FOS highlighted growing adoption of the Contingent Reimbursement Model (CRM) code by some – but not all – banks, but noted that whether or not a bank has signed up to the CRM code or not can be material in whether or not victims get their money back.
Out of the 4,752 APP scam cases it reviewed during the three-month timeframe, 2,734 were not covered by the code, which was reflected in the uphold rate; 49% of cases falling under the code were upheld, compared to just 36% that did not.
The FOS said that while many banks were improving their fraud-detecting abilities, its uphold rate in general was higher than average, with 44% of fraud and scam complaints upheld between April and June, compared to 37% across all products and complaints issues.
It also said that new rules on reimbursement, soon to be introduced by the Payment Systems Regulator (PSR) and applicable to all firms, which put the onus on banks to reimburse their customers unless they have been grossly negligent, should help to speed up the time it takes for fraud cases to be resolved moving forward.
Current digital fraud trends
The FOS said that its data showed a significant rise in complaints where people had seen investment opportunities on social media platforms and then handed over money using their cards, and warned that victims of such scams – numbering 1,500 between April and June – could have significantly less protection because card payments, unlike bank transfers, are not covered by the CRM code.
It also saw significant rises in complaints of multi-stage frauds, where funds pass through several banks before reaching the hands of the fraudster. These are particularly common in cryptocurrency scams or ‘safe account’ scams, where people are contacted by fraudsters posing as a trusted entity and persuaded to transfer money to another account.
Mobile technology at the heart of the problem
With instances of fraud now almost always entailing some digital element, Jacob Kerr, director of mobile software security specialist Appdome, said that mobile banking and social media apps were now prime targets for scammers luring in unsuspecting victims through social engineering attacks.
“More action is needed to combat these growing threats. Mobile brands must ensure they have robust security and anti-fraud measures built into their mobile apps to look after their consumers,” said Kerr.
“For these to truly work, protections must be automated and operate in real-time rather than applying a band-aid approach. This way, brands can continuously detect, block and intervene when social engineering attacks attempt to exploit user trust.
“Mobile brands need to respond to pressures from consumers, who are growing increasingly security-conscious; nearly all of 25,000 mobile consumers recently surveyed (99.5%) by Appdome demand comprehensive protection in their mobile apps and are holding mobile app developers responsible for taking care of them.
“By prioritising mobile app security and fraud protections, organisations can not only meet regulatory standards, but also ensure safer banking experiences and foster greater loyalty with their customers.”