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Why the ‘Polluter Pays’ Principle Must Be Applied to Fraud

Robin Bulloch,  Chief Executive Officer

Robin Bulloch, Chief Executive Officer | TSB

3 min read Partner content

Fraud in the UK has reached alarming levels, with over £1.2bn stolen annually, funding heinous crimes like terrorism and modern slavery. TSB's remarkable 97% fraud claim reimbursement rate sets a benchmark – but, as the government looks to takes steps to improve consumer protection, further action is needed.

Fraud has become one of the most serious and widespread crimes in the UK. Last year alone, more than £1.2bn was stolen by fraudsters. These losses have a devastating impact on people, businesses, and the UK economy, as the proceeds are used to finance terrorism, drug-trafficking and modern slavery.

At TSB, our Fraud Refund Guarantee has played a vital role in reimbursing customers who are victims of fraud. Overall, since 2019, we have refunded 97% of all fraud claims – the banking industry average is under 60%. Therefore, it is encouraging that the Government and Payment Systems Regulator (PSR) are mandating that, from next year, other banks must follow where TSB has led.

Ensuring better and more consistent consumer protection across the banking sector is a vital first step – but the focus now needs to shift to preventing fraud from happening in the first place. Although the Government’s new Fraud Strategy includes welcome measures like banning cold calls on all financial products and outlawing ‘SIM farms’, there is considerable scope to go further and faster.

I have recently written to the UK CEO of Meta to highlight that their social media platforms account for 80% of fraud cases refunded by TSB within the three most common fraud categories – investment, impersonation and purchase fraud. Similar industry data from UK Finance shows that 78% of authorised frauds start online, and 18% start over the phone.

Until all social media companies see crimes committed on their platforms as being their responsibility– and are required to share the cost of reimbursement – they are unlikely to make the effective interventions needed to reduce and prevent fraud on their platforms

The Government Fraud Strategy proposes developing online charters, but as long as the costs of fraud remain entirely with victims and their banks, then the telecoms, social media and tech companies that enable so much of the fraud we see, have no financial incentive to prevent it.

And we know it can be done. As recently as 2021, Google accounted for up to 20% of investment frauds on TSB customers. However, since it introduced additional checks to verify that firms have the correct regulatory status before showing search results, we have not recorded a single investment fraud case from Google.

However, sadly this is the exception not the rule and this serves only to underline the lack of consistency across the sector and the weakness of relying on charters alone. Until all social media companies see crimes committed on their platforms as being their responsibility– and are required to share the cost of reimbursement – they are unlikely to make the effective interventions needed to reduce and prevent fraud on their platforms.

This principle of ‘Polluter Pays’ is not new. To encourage energy companies to reduce carbon emissions and invest in green energy, the Government introduced a carbon tax. The Gambling White Paper proposes a levy on gambling firms to fund addiction treatment and education. Tackling fraud at source demands a similar response.

The time has come for the Government to insist that all the other organisations in the fraud ‘ecosystem’ step up and work together to ensure the Fraud Strategy delivers on its ambitions, reduces fraud and, in doing so, makes the UK a safer place.

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