APP fraud on the rise in UK

By Puja Sharma

Digital fraud has increased exponentially over the past couple of years with 5.1 million offences reported in the year ending September 2021. It is a major problem, particularly in the payments space where there was a 71% increase in authorized push payment (APP) fraud in the first half of 2021 and, for the first time, the amount of money stolen through APP fraud overtook card fraud losses.

Every hour, bank transfer scam victims lose more money than the average UK worker earns in a year,  Which? research reveals. That’s why we’re calling on the government to urgently act on its commitment to legislate for mandatory reimbursement of victims. Authorised push payment fraud (APP) – where a scammer tricks you into transferring money to an account they control – is now more common than card fraud, but protection against these scams still lags.

The voluntary Contingent Reimbursement Model (CRM) Code was an important milestone for victims when it was introduced in May 2019, but Which? has found that banks apply the standards of this Code inconsistently or unfairly blame victims.

Digital fraud has increased exponentially over the past couple of years with 5.1 million offenses reported in the year ending September 2021. It’s a major problem, particularly in the payments space where there was a 71% increase in authorized push payment (APP) fraud in the first half of 2021 and, for the first time, the amount of money stolen through APP fraud overtook card fraud losses.

Martin Wilson, CEO of Digital Identity Net, said: “The UK government and law enforcement can’t tackle this alone. We need the private and public sectors to play their part in building a trusted digital identity utility which lets people prove who they are.”

Using data held by the banks, which have verified the identity of 98% of the UK population, a digital identity system will enable people to prove they say who they are and verify the identity of the person on the other end of the transaction.

“Other countries already have this in place and have seen a dramatic reduction in fraud. For example, Norway’s BankID system has reportedly reduced payment fraud from 1% of daily value to a staggeringly low 0.00054%,” he added.

Bank transfer scams reached record levels In the first half of 2021, losses to APP fraud hit £355.3m, overtaking card fraud for the first time. Which?’s analysis of UK Finance figures show that between July 2019 and the end of June 2021 a total of £854m was stolen in 306,573 cases of APP fraud, and only 42% of losses were reimbursed. That means the net loss to victims is a shocking £495m – a rate of £4.7m a week or £28,203 an hour, more than the average UK salary (£25,971).

Innocent victims left out of pocket

Banks are required to refund you for losses for unauthorised transactions such as card fraud – unless you are particularly careless or ‘grossly negligent – but there is limited protection against authorised fraud. The CRM Code was designed to readdress this imbalance, but it’s clear the voluntary approach isn’t working.

Investigations have found that banks signed up to the Code are too quick to blame victims who ignore warnings or expect too much from victims even though scammers are paying for fake adverts online, calling from spoofed phone numbers, or even hijacking their devices to name just a handful of common tactics.

Fighting your corner

Banks are routinely rejecting refund claims unfairly. Our exclusive investigation in November 2021 revealed that the Financial Ombudsman Service (FOS) ruled against banks in up to eight in 10 cases of APP fraud. Victims often have to fight their corners to be treated fairly, including John Andrews, in his 80s, who recently lost £3,600 when a scammer posed as his son over WhatsApp. Lloyds Banking Group reported at the beginning of the year that the number of WhatsApp scams had surged by more than 2,000% by the end of 2021.

Time for change The CRM Code has provided an increased level of protection for some consumers, but the Payments Systems Regulator (PSR) has admitted that reimbursement levels have been significantly lower than expected. The Lending Standards Board and FOS have also repeatedly found issues with inconsistent and unfair treatment of victims.

While the government’s commitment is positive, these changes must be introduced swiftly.