The leak of 1m audio files from scam call centres in Georgia shines a light on the ruthless methods used to trick people into fake cryptocurrency investments. The scheme uncovered is a type of “authorised push payment” (APP) fraud which involves tricking someone into voluntarily sending money from their bank account.
Until late last year APP scam victims faced a lottery as to whether they would get their money back, but that uncertainty has all but disappeared. In the autumn the payments industry watchdog introduced mandatory rules that make it “quicker and simpler” for consumers to be reimbursed. Here we explain the protections in place for victims.
What is investment fraud and how big a problem is it?
The latest data from the banking trade body UK Finance shows investment scammers cheated Britons out of £56m in the first six months of 2024 alone (as well as crypto, scammers dangle too-good-to-be-true opportunities to buy gold, wine or property). In reality the sum lost will be much higher as many – including victims of the Georgian scheme, who lost a combined £9m – do not report it.
While purchase scams (when you pay for goods or services that are never received) are more common, the sophistication of investment cons means people lose more money. Investment scams accounted for a quarter of the £214m lost to APP fraud in the first six months of 2024 but only 4% of cases.
What help is there for UK fraud victims?
With some caveats, APP fraud victims should be able to get their money back. On 7 October 2024 new rules forcing banks to issue refunds up to a maximum of £85,000 came in. Setting the cap at this level was controversial as previously the Payment Systems Regulator (PSR) indicated it would be £415,000. As seen in the Georgia leak, investment fraud victims can be manipulated into emptying life savings and pension pots.
While the regulator says 99% of APP fraud claims are covered by the cap, in the same breath it admits that only 90% of the money lost will be reimbursed. In 2023 – out of more than 250,000 cases – its data showed 411 instances of people losing more than £85,000, with the average loss among this group being £175,000.
However, victims had previously faced pot luck when it came to making a claim. Although a number of banks and financial companies signed up to a voluntary reimbursement code, it was not applied consistently. In 2023 this set-up resulted in just over 60% of the money stolen returned to victims but while some institutions refunded 96% of cases, for others the figure was just 3%.
The new refund regime ups the pressure on smaller payment firms to stop fraud. In 2023 smaller fintechs, as opposed to the traditional high street banks, received just over half of all fraudulent transactions even though they were responsible for just under 10% of all Faster Payments (the system used for mobile and online banking). Under the new rules the cost of reimbursing victims is split 50:50 between the sending and receiving bank or payment firm.
Your money back in five days?
The regulator says the new protections make getting a refund “quicker and simpler” for victims. However, the new regime applies only to domestic transfers – when money is moved from one UK bank account to another over the Faster Payments system or Chaps (used for large transactions like house purchases).
The rules don’t cover money transferred overseas because the PSR is a UK regulator and does not have international jurisdiction. However, in this instance victims should still contact their bank or payment provider to see if they will consider reimbursing them.
Before the new rules took effect 66% of cases were reimbursed under the voluntary code. Now the protections are in place regardless of who you bank with, and the grounds on which a claim can be rejected are very limited. As a result the regulator says it expects the “number of reimbursements to increase significantly”.
Indeed, rather than months of wrangling, the vast majority can expect their money back “within five business days” of making a claim. But the regulator does warn that not all claims will succeed, as individuals will not be reimbursed if “found to have been complicit in the fraud or grossly negligent”.
It explains that “gross negligence is a high bar” and does not apply to vulnerable consumers. The onus is on banks and payment firms to prove where customers have acted with gross negligence, for example, by ignoring specific, tailored warnings or not responding to reasonable requests for information.
Where payment firms need more time to gather information to help assess a claim, they can “stop the clock”. But to make sure there aren’t any delays in reimbursement, the payment firm must arrive at a decision within 35 business days. Firms can apply a £100 excess to claims but it cannot be levied on vulnerable consumers.
If you have been conned out of more than £85,000 all may not be lost as individual firms may choose to reimburse more than this. There is also the option to raise your case with the Financial Ombudsman Service which has a compensation limit of £430,000. It is a free service and the ombudsman sets out the process that consumers should follow on its website.
The Georgia leak victims were targeted before the new UK rules applied. Where does this leave them?
Under the new fraud rules victims have 13 months from the time they first become aware of the scam or scams to report it. For those who were targeted before October 2024 the advice is to still contact their bank or payment firm.
The PSR says firms that had signed up to the voluntary code will consider these claims in line with those standards and it has suggested that other firms “consider all claims reasonably and assess whether someone has been tricked into making any payments”.
“There is nothing stopping firms from considering cases and making reimbursements for claims made where the scam occurred prior to 7 October 2024,” the regulator says.
Article by:Source: Zoe Wood
