New Banking Code on Fraud

Authorised Push Payment (APP) fraud is where a fraudster convinces the victim to transfer money to them, usually under the guise of an authority, the victim’s bank or a supplier. Once transferred, the money is likely to be transferred again and then difficult if not impossible to retrieve.

Traditionally the banks have treated these frauds as being the victims own fault and normally refuse to provide reimbursement. However many of these frauds are very sophisticated and difficult for the victim to know they are being defrauded until it is too late.

Also, the banks practice of simply following instructions and sending money to anyone at any account without any checks means they do little to prevent these frauds and often act too late after they are informed of a problem and the money and the fraudster are gone.

A new draft voluntary code for banks aims to make it more difficult for the perpetrators of these frauds and more likely for the victims to get recompense.

The new code establishes the principle that if customers take “the requisite level of care”, they should be reimbursed by their bank.

However, the code does list eight ways that banks can justifiably refuse to reimburse customers who have been defrauded. These include cases where customers:-

  • refuse to heed warnings from their bank
  • “recklessly share” their security credentials
  • fail to take steps to make sure they person they paid was who they thought they were
  • fail to be honest with their bank
  • are “grossly negligent”
  • fail to heed a confirmation of payee result (see below)

Questions also remain about who is liable when both the bank and the customer appear to have taken all the necessary steps to prevent fraud.

Customers were scammed out of £503.4m between January and June, according to the finance industry’s own research.

Favoured methods include duping victims into paying in advance for a product or service that doesn’t exist or impersonating a trusted organisation such as the police.

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