Victims of the authorised push-payment fraud ‘epidemic’ currently have no protection against losing vast sums of money. But with regulators now tackling the issue, Ritchie Bann asks what the proposed scheme is likely to mean for payment service providers.
“Push-payment scams have become endemic,” says William Clerk, a barrister at 2 Temple Gardens who specialises in recovering money from bank-transfer scams. “It’s not just the volume that’s worrying but the ease with which it is happening. “At present, you could be making a payment to Mickey Mouse, but as long as the sort code and account number match up, it will go through.”
“Time is of the essence; any delay will make it likely that the money is spirited away, probably out of the jurisdiction,” says barrister William Clerk. “While it is still possible to claw the money back once this happens, it becomes much more difficult.”
Increased collaboration can also keep the fraudsters at bay. “Victims must also communicate with the banks as soon as possible,” adds Clerk. “Separate from the litigation process, banks can often ring-fence monies when they notice that these have been misappropriated due to a fraud.”
“While the PSR has been looking into setting up a compensation scheme for victims of such frauds, this is highly unlikely to deter perpetrators,” says Clerk. “In fact, it may even have the opposite effect. If fraudsters know victims are likely to get their money back from the bank anyway, the real victim in their eyes will be the ‘big bad bank’. This is obviously far from the truth, as insurance premiums will consequently go up, and banks will start charging people more for their services.”
This article was originally published in Chartered Banker.