"We had asked that government and regulators work with industry to find a long-term solution to funding of ‘no blame’ cases, involving other sectors like online platforms"
UK Finance is today announcing a change to the process of reimbursing so-called ‘no blame’ cases of authorised push payment (APP) scams under the voluntary industry Code.
The trade body is bringing in a simplified process which enables signatory banks to individually pay back cases rather than through a shared central pot. This new process comes as the industry renews its call for a comprehensive, multi-stakeholder approach to tackling the root causes of these scams.
Effective today, the new process will mean individual banks oversee the end-to-end reimbursement process for APP scams and reaffirms the industry’s commitment to a fair outcome for victims of ‘no blame’ cases.
The new framework only applies to the financial institutions which have signed up to the APP Voluntary Code and their customers.
APP no blame scam cases were previously funded through an interim arrangement, where seven banks and building societies provide funding into a central ‘no blame’ pot – with the signatory banks directly refunding customers in such cases, and then claiming it back from the pot.
APP scams occur when people are tricked into authorising a payment to an account that they believe belongs to a legitimate payee – but is in fact controlled by a criminal. In ‘no blame’ cases, both the customer and the bank did everything expected of them under the Code, but the criminal is still able to carry out the fraud. Criminals do this by bypassing both banking security systems and customers’ due diligence by exploiting vulnerabilities outside the control of the financial sector, such as fake investment adverts on online platforms.
UK Finance data shows criminals are increasingly exploiting online platforms to carry out fraud, with the rise in online-enabled scams especially notable throughout the Covid-19 pandemic.
UK Finance is strongly advocating to the government to include economic crime in scope of the Online Safety Bill. This would make tech companies responsible for protecting consumers from the threat of fraud and reduce the opportunity for criminals to target the most vulnerable people with scams, as well as tackling crime which finances terrorism and child sexual exploitation and abuse.
Katy Worobec, managing director of economic crime at UK Finance, said: “The interim funding pot was originally set up because we had asked that government and regulators work with industry to find a long-term solution to funding of ‘no blame’ cases, involving other sectors like online platforms, which are used by criminals to perpetrate the fraud, contributing to reimbursing the customer. Sadly, that is yet to happen.”
Vim Maru, group director at Lloyds Banking Group, commented: “There will be no change for our customers as a result of UK Finance’s announcement. When the central funding arrangement was first put in place, it was expected that those organisations in the wider ecosystem would also contribute. As this has not happened, the arrangement is no longer needed. Protecting our customers from fraud remains our priority and we are committed to reimbursing victims of scams in line with the voluntary code.
“Identifying and preventing fraud requires the combined efforts of every sector. It is disappointing that many organisations outside financial services have been slow to adopt measures designed to stop fraud, given the fact that scams often originate outside banking and we know this influences where fraudsters operate. There needs to be as much focus on prevention as there currently is on reimbursement, starting with the inclusion of financial fraud in the forthcoming Online Safety Bill.”