Baroness Ludford: Brexit risks cross-border cooperation on fraud

Posted On: 
24th May 2019

Liberal Democrat peer Baroness Ludford writes following her parliamentary question on 'Preventing fraud perpetrated on bank customers'.

Authorised Push Payment (APP) scams cost customers over £350 million in 2018.
Credit: 
PA

My oral question to the government was prompted by press coverage over several years and the long-running campaign by consumer organisation Which? about the alarming increase in criminal fraud and scams against bank customers.

There are many ruses criminals employ to persuade an innocent customer to transfer money online. Two main ones are: email hacking to persuade the customer they’ve learned is about to pay their solicitor or builder that the bank account has changed; and ‘number spoofing’ where the fraudsters hijack the bank’s telephone number - so that it looks genuine when it displays as the number stored in the phone’s address book - and instruct the customer to set up a new account ostensibly to avoid fraud. In both cases, the criminals of course spirit the proceeds of their crime away, and both sending and receiving banks tend to wash their hands of responsibility.

The very term applied by the industry – ‘authorised push payment (APP) scams’– is problematic both because it fails to capture the trickery used to procure the transfer and because the charge that a payment was ‘authorised’ has been thrown back at customers in order unjustifiably to deny them refunds. The other defence by a complacent banking industry has been that customers have been negligent, but meanwhile they’ve offered far too little support to prevent us from falling for tricks. APP cost customers over £350 million in 2018.

So there has been a very hit and miss pattern of response by banks regarding compensation and not enough energy by regulators to force them. My question was in fact tabled before news that TSB (of which I am a customer but I was unaware of that pending news!) announced that it would refund all innocent victims of fraud, which sets the bar for other banks to follow. Having to cough up will be a great incentive for more action by banks.

The minster Lord Young of Cookham confirmed that a new code will mean implementation of then long-overdue ‘confirmation of payee’ so that an alert is raised if payee name and account details do not match, and this should help detect and deter fraudsters trying to intercept transfers. He also said ‘Action Fraud is introducing a more responsive service so that if you report a fraud, you will get feedback from the banks’; about time too!

Pressed by my colleague Baroness Susan Kramer as to the value of a voluntary code which banks can opt out of, Lord Young committed to ‘see whether there is a case for legislation’. Liberal Democrats encourage the Government and industry to put in place legislation which will further protect customers.

All fraud, including APP, has no regard for borders, and Brexit is the friend of fraudsters. It is vital that the UK maintains its participation - under severe threat from Brexit - in cross-border police and criminal justice cooperation, to combat serious organised crime including international fraud by retaining the European Arrest Warrant, membership of Europol and access to EU information databases. 

Baroness Ludford is the Liberal Democrat Lords Spokesperson for Exiting the European Union