RUTH SUNDERLAND: As things stand, banks are pretty much the only ones on the hook when it comes to fraud, but telecoms companies and social media giants must be held accountable too
Amidst all the fears over the economy, one industry is booming in the UK like no other.
It’s a multi-billion pound earner, it is innovative, it is fast-moving, the leading practitioners are extremely intelligent and entrepreneurial. Only one problem: the industry is fraud.
No-one bothers to do a Bonnie and Clyde and physically rob a bank any more. Why use a gun when a keyboard is a more potent weapon? Covid-19 has provided perfect conditions for it to flourish and the figures provide evidence of its rapid expansion.
Taking control: Banks want financial fraud needs to be included in the Online Harms Bill
In the first six months of this year, there has been a 71 per cent increase in ‘authorised’ fraud, where people are conned into handing over funds or personal details, with losses of £355m.
In truth, fraud is too mild and white-collar a word to do justice to the effects. What is happening is a wave of theft amounting to hundreds of millions of pounds a year, leaving some victims with their lives ruined and the banks picking up huge bills that ultimately are passed on to honest customers.
The money stolen is channelled into crimes such as human trafficking, drug smuggling and terrorism.
Much of it goes unreported as people have a sense of shame about being fooled.
They shouldn’t. Several senior banking executives have privately admitted to me they have almost fallen for a scam – I have narrowly missed being cleaned out myself.
You don’t need to be stupid to succumb: it just takes a moment’s inattention. The banks come in for criticism because many victims are not reimbursed. Fewer than half of those who have fallen prey to ‘authorised’ fraud get their money back.
Even so, the High Street lenders are devoting major resources to fighting fraud: NatWest spends more on combating, preempting and reimbursing fraud than it does on its branch network.
It has 5,000 staff working on anti-fraud and money laundering, which is one in ten of its employees in the UK.
What a terrible waste of resources that could be productively deployed.
David Lindberg, chief executive of retail banking, describes the UK as a paradise for fraudsters and worse than other places. This is partly, he says, because Britain is digitally advanced so there is more opportunity for sophisticated stealing, and partly because we Brits are very trusting.
The internet is infested with brand cloning scams where fraudsters masquerade as legitimate financial companies.
Impersonation scams where fraudsters pose as Royal Mail, DPD, the NHS or HMRC to send out bogus texts and emails have shot up, with people losing nearly £130m through these in the first half of the year.
This is not within the banks’ control. Nor is the craze for cryptocurrencies, which are used by crooks to move money rapidly.
What can be done? We have all become used to instant payments but there is a case for throwing some sand in the system. A few hours’ delay in the clearance of risky payments would curb fraud, and not be a major inconvenience for genuine transactions.
Banks want financial fraud needs to be included in the Online Harms Bill. The problem has extended far beyond the banking system. Yet as things stand, the banks are pretty much the only ones on the hook.
Telecoms companies and social media giants, whose services and platforms are widely exploited by fraudsters, need to be held accountable too. Time for the Government to bang heads together.