The 'F' word (...fraud, of course!)

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Fraud used to be a word that banks and other finance companies didn’t like to use. It wasn’t good to be perceived as being susceptible in any way to fraud. There would be a reluctance to share how a fraud may have been perpetrated. Now, however, things are very different.

UK Finance fraud report

UK Finance has just published its report on fraud in the payment industry during last year: “Fraud The Facts 2019”[1]. This is based on information gathered by the Economic Crime team within UK Finance, which represents more than 250 members, and identifies the most common form of frauds in the financial services sector.

The headline statistics are, on first glance, quite staggering – £1.2 billion stolen through fraud during 2018. We see a 16% increase in unauthorised fraud losses across payment cards, remote banking and cheques – totalling over £844 million – and over 84,000 incidents of authorised push payment scams – amounting to losses of over £354 million. But this has to be considered in the context of the overall scale of the industry.

Fraud still impacts only a very small fraction of those payments. There were 2.5 million card frauds during last year but out of 20.4 billion transactions. In addition, over £1.6 billion of unauthorised fraud was stopped by the steps being taken in the industry, which represents £2 in every £3 of attempted fraud being prevented.

In the sharing of information, the industry can identify trends and the more common frauds. The fraudsters are constantly developing, adapting to advances in technology and more sophisticated systems and fraud prevention methods. For example:

  • Counterfeit card fraud continues to drop, with the use of Chip and PIN technology, but there is an increase in remote purchase frauds using customer card data.
  • The number of phishing websites targeted against UK banks and building societies has reduced to their lowest ever level but fraudsters have significantly increased deception scams, and impersonations of other organisations such as HMRC, online retailers and telecoms companies.

In recognising how these frauds take place, the industry can take steps to prevent these happening, or at least minimise the impact (UK Finance is also raising consumer awareness with its recent ‘Take Five’ campaign[2]). An industry that is taking those steps together is much more effective than an individual lender.

What can we do?

As lawyers working in the industry, we also see these trends and changing methods. Where the potential liability lies following a sophisticated fraud is an area that will give rise to new disputes, particularly where the industry is seeking to take the burden of losses away from customers. We will see new types of fraud as the fraudsters continue to adapt their tactics. However, our focus will remain the same – seeking to ensure that lessons are learnt from frauds – and that all steps possible are taken to recover losses from the perpetrators, using the full extent of the legal armoury available, maximising recovery and minimising the prospects of similar events happening again.

Fraud will happen – let’s keep talking about it.



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