News, Culture & Society

Earning a penny of interest from a fraudster could cost you a refund

How earning just a penny of interest from a scam investment could cost you a refund

Scam victims who receive a penny of ‘interest’ on their fake investments are being denied refunds by banks which refuse to consider it fraud.

Instead, they argue the matter is a ‘civil dispute’ which is not covered by a voluntary scam reimbursement code. This promises to refund those tricked into making bank transfers to fraudsters, often posing as legitimate firms.

Money Mail has also heard of instances where police have refused to investigate scams on the same grounds.

Excuses: Banks are arguing that fake investment schemes are not covered by a voluntary scam reimbursement code 

Under the code, an authorised push-payment scam is defined as when ‘the customer transferred funds to another person for what they believed were legitimate purposes but which were, in fact, fraudulent’. 

This could include sending money for non-existent investments or goods that are never delivered.

The code does not apply to ‘private civil disputes, such as where a customer has paid a legitimate supplier for goods, services or digital content but has not received them, they are defective in some way, or the customer is otherwise dissatisfied with the supplier’.

Anti-fraud campaigner Mark Taber says: ‘Banks often try to fob off victims by claiming the case is a civil dispute rather than a scam. 

But most investment frauds operate as Ponzi schemes to some extent, whereby some of the funds taken from later victims are used to pay interest or dividends to earlier victims so they do not realise they have been scammed and report it.’ 

He admits it is a grey area and banks will take their own approach.

The Financial Ombudsman Service says it sees cases where banks incorrectly classify scams as civil disputes.

Richard Emery, of 4Keys International, says: ‘Banks are clearly acting in their own interests rather than their customers.’