Widespread financial scams ‘out of control’, campaigners warn

Campaigners have issued new demands for the government, police, the banking industry and businesses to take immediate collective action on personal financial fraud after an avalanche of reports showed runaway increases in the number of cases and the amounts being stolen across a wide range of circumstances.

Fraudsters have been around since humans had assets worth thieving, but the modern banking revolution – focused on delivering the quick and easy digital access and management of our money that consumers demand – means more of our cash is being stolen, and far faster, than ever before.

This week, consumer group Which? revealed banking customers are losing £674 every minute to fraudsters convincing them to transfer money to them by deception, and the Financial Conduct Authority (FCA) and Action Fraud warned that the number of foreign exchange and cryptocurrency scams affecting UK residents more than tripled in the last tax year.

We’re even being fleeced when we sell our own items or services online, according to transaction management firm Shieldpay, which also reported this week that almost half of those sellers have been defrauded for an average of £2,054 since they began trading this way.

Outsmarted

Gone are the days when the height of sophisticated scamming meant getting an email from a Nigerian prince or notification of a lottery win you didn’t enter, though they’re certainly still out there.

The kind of crimes highlighted this week involve significant effort and complex strategies in a bid to both intercept everyday transactions and con people out of their cash directly.

Forex and crypto scams, for example, reel in investors by promising high returns while guiding them through a reinforcing labyrinth of reassuring supporting material.

The FCA, which reports that £27m was stolen through this kind of scam in 2018/19 alone, warns fraudsters often use social media to promote their “get rich quick” online trading platforms. These then link to professional-looking websites where consumers are persuaded to invest.

Investors will often be led to believe that their first investment has successfully made a profit. The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact.

Action Fraud reports show that, on average, victims were each scammed out of a massive £14,600 from forex and crypto scams in 2018/19.

Out of the blue

“Cryptocurrency is a scammers’ paradise, as many people ‘investing’ in these assets do little research and are sucked in by the promise of supersized returns in an impossibly short space of time,” says Laura Suter, personal finance analyst at investment platform AJ Bell.

“Using social media and the lure of expensive products to draw people in, scammers have made a fortune off their victims.

“Anyone handing over their hard-earned cash should make sure they understand what they’re getting into, they’ve checked it’s a legitimate investment, and not rely on hype and excitement from friends or social media. Investing isn’t a get-rich-quick scheme – and anything that uses a fear of missing out or requires you to invest before thinking is best to be avoided.

“Anyone who is thinking about investing in something should carry out a few simple checks before parting with their money. If someone calls you out of the blue – hang up, and if the returns sound too good to be true, they probably are. Don’t be lured in by an impressive-looking website or any celebrity endorsements, and if your friend recommends something to you, don’t assume that they’ve done all the research for you.

“Finally, you can check on the regulator’s register to see if the company is legitimate.”

Out of time

Meanwhile, Which? is urging banks not to delay tackling transfer fraud, the name given to crimes where a fraudster convinces a consumer to transfer money to them, usually by making them believe the criminal is an individual they are planning to send money to, such as a solicitor during a property purchase or an employee of their own bank. Victims often lose huge sums, with many reporting the theft of their entire life savings.

The consumer champion is calling for all banks to urgently reassure their customers that they will be better protected against fraudsters by signing up to a new voluntary industry code, which comes into effect next Tuesday.

The new code is designed to give better protection against transfer fraud and to ensure all those who have lost money through no fault of their own are swiftly reimbursed.

Last year, just 23 per cent of losses due to bank transfer fraud, also known as Authorised Push Payment fraud, were returned to victims.

Responding to the fraud figures reported this week, Gareth Shaw, head of money at Which?, said: “Millions of people are at risk of losing life-changing sums of money to fraudsters operating increasingly sophisticated scams. But they have little hope of getting their money back and victims are often deprived of justice, with our research showing fewer than one in 20 cases reported to Action Fraud are solved.

“In order to fight this worsening crime, a more joined-up approach is needed from the government, police and businesses whose services are exploited by fraudsters to prevent people from being scammed in the first place – and to act fast to recover their money when the worst happens.

“The banking industry must urgently step up its preparations to introduce confirmation of payee name checks, which could cut bank transfer fraud in half overnight.”

The Take Five campaign provides tips on staying safe against preventable fraud.