I picked up on this subject last week when a rather large editorial item appeared in the Daily Mail. This subject was also in the popular UK Tabloid The Sun. When a subject hits the mainstream press it makes sense to know which way the wind is blowing. This article points out that Banks including the Fintech newcomers may well be forced by regulation to refund clients scammed by Payment fraudsters. The Payment Systems regulator is looking at the subject and the government is pushing them hard by the sound of it. Let’s hope that a fair and reasoned outcome follows. I am not hopeful as the regulators in general are very good at wielding sledgehammers which miss the nut. In the first place if a bank customer sends money to the wrong person it is prima facie their fault. They have been tricked. Whatever happened to Caveat Emptor? The bank or the sender company has not made a mistake: or have they? I think this might just be another case of poor regulation being the catalyst for dismal practice. In order for this type of fraud to take place several things must be in place. Firstly there has to be an account to receive the fraudulent payment. If you are regular Joe of the street opening an account is quite difficult. ID utility bills, Certificates of incorporation etc. All laid down by the regulator. Would it be too much to suggest that all this is very easy for a fraudster. They know exactly what the bank will require and will have all the documentation required whether genuine or not. The account is only likely to be used over a very limited time frame and will have a somewhat strange transactional pattern should overseas payments be made automatically? And what about the senders transactional details. A large payment such as a deposit on a house would generally stick out like a sore thumb. Is it too much to expect a bit more due diligence when opening a bank account and monitoring its initial and particularly unusual transactions. Some things would be very easy such as fingerprints and photographic records. This is not rocket science but if the banks are going to be held responsible for their client’s foolishness then they should do much better to help themselves.
Following on from the comments above is a heartbreaking story of a lady who lost £ 168k in a fraud involving a money transfer after selling her property in Holland to move back to the UK to enjoy her retirement. It is well worth a read because it first of all details the perniciousness of these criminals and secondly that online payment and banking fraud is now almost an industry requiring punters to be much better informed of what they are up against. The article concerned also mentions Fintech payments service Transfer Wise and digital banking high Flier Revolut who were caught up in a similar ploy. This particular case involved the victim downloading the scammers software to her mobile phone. She was led to this by what seemed to be an innocent Google search. The scammers are of course paying Google for the links to appear at the top of the search results by buying “ads”. Which is unsurprisingly the most profitable part of Google’s business. Of course Transfer Wise and Revolut are not to blame and both provided full refunds to the clients but surely Google must take part of the responsibility by essentially legitimising the search in the first place. In Transfer Wise’s case they had asked Google to remove the offending link but Google had not acted on it prompting claims for the FCA to be more proactive in its work on this area. Quite rightly so. Google are at least partly responsible and hopefully will be made to shoulder some of the cost.
The Financial Conduct authority has fined Barclays £ 26m after it essentially pleaded guilty to shortcomings in its dealings with struggling clients over a four year period. Apparently some 1.5 million customers were involved and the uncontested findings of the FCA meant that the fine was discounted by 30% from an initial £ 37m. Barclays have already refunded some £ 273 million in compensation. Something tells me that they have got off likely from what looks like a systemic failure of policy. After all the compensation works out at £ 182 per client. Nickel Dime.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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