ARTICLE 7 - PAGE 23 | BLOCKCHAIN INDUSTRY REVIEW
Reducing Instant Payment Fraud requires transparency, unity and modern technology
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by John Betrand
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ociety and Law has reached a check point where the new digital world is evolving so fast, that it is almost beyond the current laws and banking practises. Let’s take a look at fraud in Faster Payments, UK’s instant payment initiative, which is being replicated in over 50 countries, and soon to become available for cross border payments. Faster payments fraud totalled £330 million in 2019, an annual increase of 30% over 2018. In addition, annual bank investigation costs are estimated at £125 million. This costs the banking industry £9 per year per active bank account. Given the pandemic and the added acceleration by society to digital, a further increase of 30% in 2020 in faster payments fraud seems probable, increasing the cost to active bank accounts to £12 per year. This makes the practice of ‘free bank accounts’ even more challenging. That is if the banks absorb the total fraud cost. At this time, only 41 percent is being reimbursed. The majority of fraud write offs remain in limbo causing at least 100,000 banks’ customers significant emotional and financial stress. Fraudsters use a combination of techniques including text, email, too good to be true web sites, offers and
telephone calls to create emotional manipulation on the owner of the bank account. Technology enables the fraudsters to operate at large scale, sending thousands of requests to people in Covid isolation; then cold calling to find the vulnerable who are maybe feeling isolated and lonely and applying psychological undermining to get what they want. Website scams are also now easier to fall for than ever. Their goal being to have the owner of the bank account move money to the fraudsters’ bank account using instant payments. All while working from home. Corporate frauds are 30x higher than the average consumer’s loss of £3,600. No wonder the corporations and SMEs are under constant bombardment from fraudsters outside and inside the company. Fraud is corrosive to society, individuals and businesses and the Government and banks have initiated programmes to help people endeavour to defend themselves against fraud: •
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The Take Five Government Campaign encourages bank customers to take and ensure they know who they are paying; but few people actually check internet T’s and C’s. Banks themselves provide their own warnings and often request the client to tick accept before moving to the next step. The regulators have noted many bank warnings are vague and ineffective. Banks that have Confirmation of Payee, (6 out of 32 direct faster payment banks) check payee account name, sort code and account number before giving approval. Banks operating under the Voluntary Code (12 banks) have shown little consistency towards the rules with many fraud reimbursement being inappropriately declined.
