Scam Special: Game Changing New Fraud Rules

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Hello, welcome to this special Moneybox podcast. I say that because it's being recorded live in the glass atrium of Key House at Media City UK, the home of the BBC in the North West, and I can look up five stories and see, yes... blue sky. And that suits our mood because we're here with all our guests and the whole team just two days before a momentous change in the way banks treat customers who have money stolen from their accounts by what's called authorised push payment fraud.

And for once, it's good news. So our whole podcast is dedicated to what that change will mean and how it will work when it begins on October the 7th. Push payment frauds are big business. UK Finance, the bank's trade body, says in 2023, a record 232,000 people had nearly £460 million stolen by thieves who use... what I often call psychological warfare, to trick people into believing their money is at risk, promising to protect it, and then, of course, nicking it.

Until now, some banks have been reluctant to reimburse all their victims for all their losses, but from Monday, October 7th, new rules should mean almost all victims will get almost all their money back, usually within a week. Moneybox gets hundreds of emails from people who've had money stolen this way, and it's not just money they lose, they're robbed of their peace of mind, their self-confidence, even their mental health, as listeners Kate, Carol and Bella explain.

Emotionally and mentally, it was absolutely horrendous. You feel completely violated. I was thinking about it all the time. I couldn't sleep at night. I felt as though... In fact, it was my fault after a while. Complete shock, panic. I didn't know if I could stop them, if there was a way of sorting it out. So I was really distraught and upset.

Just a few of the people who've contacted Moneybox after losing money to these pernicious frauds. Well, with me in this wonderful atrium, I have three top guests. And first, David Jeal. He's Managing Director of the Payment Systems Regulator, which has introduced...

these new rules. David Geel, how significant is this change? Thank you. I think these changes are absolutely huge. As we've heard, these scams can be absolutely devastating. And what we're doing is making it mandatory for banks and payment firms and e-money firms to pay out.

Within five working days, they'll pay out up to £85,000. And importantly, the fraudsters bank also has to contribute 50% of that. So we're really changing the incentives to prevent fraud in the first place. And that has to be where we need to go. Yes, up to £85,000. I mean, it's probably 60-odd percent who get refunded now. What percentage will it be in the future?

So our data shows that, based on last year, over 99% of people would be reimbursed with a limit of 85. It is important, though, to recognize that... Banks can pay out more. They're not capped at 85. They can pay out more. And if customers have concerns, they should contact their bank or payment firm. And just briefly, there is a deadline for applying, though, isn't there?

There is. You should apply within 13 months of the scam taking place. Of the last payment you make. Well, here to speak for the banks is Ben Donaldson. He's Managing Director for Economic Crime at UK Finance. That's, as I said, the trade body for the banks and these smaller payment firms. Ben Donaldson, why has it taken rules to force banks to refund their customers? All other thefts you refund automatically.

So for a long time we've been investing more than anybody in trying to protect the public from these awful crimes, which is, as you rightly said earlier on, causes... psychological harm which can be incredibly severe in some cases and really rob people of their mental health as well as their money. I think the other harm that this type of crime causes is that it funds organised crime and the organised crime groups who are responsible for perpetrating these crimes.

are involved in other types of criminality as well and cause further societal harm. Focusing on prevention, I think, is the really important thing for us. Yes, indeed, but you haven't managed to do that, have you? Because the number of people who've lost money to this fraud has been going up, and the amount is still nearly half a billion pounds a year. Will the fact banks have to pay encourage banks to do more?

So I think the key here is doing more with other sectors. So much of this criminal activity begins online and through the telecommunications services, particularly on social media. So we need to work much more closely with those other sectors to prevent these crimes in the first place.

welcome these new rules I think it will it will provide a more consistent approach across the industry and I hope that it improves the experience of people who are unfortunate not to fall victim to these to these horrible crimes yes I mean I've heard I've heard these new rules called Game Changing.

David told us they were, you know, absolutely unique and important. But are all your members, including the smaller ones, because it's not just the big banks we've all heard of, there's a lot of little payment organisations, aren't there, that are involved. Are they ready for this big change?

So we've been working in very close collaboration with David and his team at the PSR and with our members to ensure that our members are ready for Monday. The payment services industry is huge, as I'm sure you know, and there are a large number of firms. who are in scope of this regulation. So I would say our members will be ready for Monday. And I think it's good that this consistency across the broader industry will encourage that approach across everybody.

Also here is Catherine Westmore. She's Senior Research Fellow at the Centre for Finance and Security at RUSI, the Defence and Security Research Organisation. Catherine, the smaller payment... firms, they were completely out of scope before. Now they're in scope and they've got to pay within five days. That's the rule. Are they going to be ready for this? I think, as Ben said, a number of them, and a lot of them have been.

really looking to invest in their controls to try and ensure that they're ready for Monday when it comes in. I think I have some doubts as to whether some of the smaller institutions in particular are really ready for the impact of this, particularly... those banks, and as David mentioned, the liability is split between banks who send payments and who receive fraudulent payments.

And for those who receive fraudulent payments who are now financially liable, this is going to be a huge shift for them, particularly those who have allowed their accounts to be used and abused by criminals over the last few years. And we heard from Ben that...

Other people are involved in this. I mean, these frauds begin on the phone or with a text message or whatever. And the banks have said in the past tech companies should pay some of the cost of them. They should pay some of the reimbursement. Do you think that would be right? I think it would be very difficult to extend these kind of rules to the tech sector and to the telecom sector. And actually, I think that could be very detrimental to consumer.

because it will become very complicated. What I think the tech firms do need to do is contribute financially. And so we've certainly called for a fraud levy on the tech firms so they contribute to the cost of enforcement and they are financially... have a kind of financial skin in the game. Yes, so not just the banks, the receiving and the sending and the receiving bank.

tech companies as well. Thanks to all of you. Stay with us, of course. But let's hear from someone who's suffered from one of these frauds. She's with our reporter, Dan Whitworth, who's been reporting on cases of fraud, Dan, for years, haven't you? They're on the sofa over there with another familiar voice on the programme.

Aaron Chohan, a lawyer and a member of the Independent Fraud Advisory Panel, Dan. Yeah, thanks, Paul. So Jane, I've got here with me on the sofa. Now, Jane, a little bit of your background. So you fought for months and months to get a refund for several hundred thousands of pounds stolen from your dad in an investment scam.

You only found out about it after your dad had very sadly died. First of all, just talk us through the impact on you, your family, your mum, who was obviously left behind as well. Talk us through how that impacted you guys. Initially we felt... powerless when we found out on the day of my father's death he hadn't told us before that as a family and we wrote it off and just tried to move on.

It was only a year later when I read a BBC article that I found out that it was maybe possible to try and get some of this money back from the bank. There was a successful romance scam, similar. Bain two hours. Contacted the bank and after six months they agreed to refund half the money. And they also instructed me to contact the financial ombudsman to actually secure interest payment because this had...

the five-year duration since the scam and since the payout. I mean, you summed it up really eloquently there, but that was obviously a huge, big, long fight. What was that fight like with the bank, with the Ombudsman Service? I mean, it obviously took... took place over months and months and months. It did.

But I think fight's a little bit stronger word because they were actually very, very supportive. And I was really encouraged by how they treated me professionally, courteously, both the bank and the ombudsman. And I would urge... anybody else in a similar situation to contact the bank and they will get the support.

from the bank and obviously you were fighting on behalf of you or you were taking this battle you were on behalf of your dad your mum was still around but you had lasting power of attorney which i know you've talked to me about was a really important sort of way for you to be able to help your mum yes very powerful

and it means that the victim doesn't have to get involved. The banks and the ombudsman did not even want to speak to my mother, surviving mother. They didn't need to. Everything was done through me through the power of attorney. Aaron, obviously friend of the show, you know the law surrounding this area inside and out.

David was saying banks only obliged to refund up to a limit of £85,000. A lot of inconsistency in the voluntary scheme at the moment. Is this new mandatory set of rules that come into effect on Monday, are they going to draw a line under the inconsistency about... how different banks approach victims, cases like Jane.

That's exactly what the aim is here. And that's what we will see. We'll start to see this process of more consistency, the same standards being applied. We're going to have a situation now where the same types of fraud are going to be dealt with by the same way by different banks. And that's what the...

industry are looking to do they're improving their standards and that will help people like Jane's family and others who've been victim to this type of fraud. And what sort of changes are we seeing in terms of those standards because obviously like I say it's around about two-thirds of victims who are reimbursed at the moment. hopefully going to be 99% of victims come Monday going forward. What's that going to look like for people?

Well, we're going to see, as we've heard already, we're going to see quicker reimbursement. We're going to see a long stop date, really effectively two months in real time. We're going to see a consistency of types of fraud and the level of return being far quicker. Okay, thanks, back to you Paul.

Thanks very much, Dan. And we mentioned the £85,000 limit earlier, David, and of course that would have affected Jane. Her father was defrauded of a lot more money than that. And it's not just people with large losses who are completely... about that, the consumer group which has long campaigned for banks to treat victims better. Here's their Sam Richardson.

We were hugely disappointed. It's essentially a betrayal of consumers in favour of small payment firms. It's going to affect all of us because if... firms don't have to reimburse fraud above that 85 000 cap they'll have less incentive to invest in their anti-fraud measures because they'll be losing less money

There's another point as well that you don't have to be fantastically wealthy to lose more than £85,000 in a scam. Imagine you're buying a house and need to send over the deposit or other savings. Or imagine you've just accessed your pension and wondering what... to do with it both of those could put very normal people over that cap and they just won't get their money back

Now, David Geel, strong criticism there for this new limit of £85,000. And as you know, it was going to be a lot more than that. And your own impact assessment said it would weaken incentives to prevent fraud and increase psychological... costs for the victims, about 400 people a year. Why are you doing it?

Well, what we've had to do is look at the data, and that's what we said we would do ahead of implementation. The latest data that we see says that well over 99% of customers would be protected with a limit of £85,000. But there's not much comfort for the 411. No, but those people can still make a complaint. This is not that banks can go beyond the £85,000. Anyone who has been defrauded in this way should contact their bank or payment provider as soon as possible and they will help.

through the process if they're not satisfied with the bank's response they can go to the financial ombudsman service so there is still a route but it was a finely balanced decision and what we need to consider is the appropriate degree of protection for customers alongside encourage

innovation and growth in the market. Yes. I mean, we had an email just this morning from a lady. She lost £278,000. Now, she did eventually get back most of it, but she would actually only have got like £85,000 under your rules. And, you know, why does she and Jane... deserve not to get all their money back. So that's not necessarily the case, Paul. I think what we see with the rules is the banks will have to refund the 85,000 within the five working days or for more complex cases, 35.

But they can still complain. People can still go to the bank, ask for more, and they can go to the financial ombudsman if they're not happy. Ben Donaldson, your members campaigned for this cap, but it is voluntary. You can pay more. How many do you think will pay out more than £85,000?

So I think it would depend on the circumstances of each case. But I think it's a really important point that David makes there that the cap is for mandatory reimbursement. That doesn't mean that there can't be reimbursement beyond that. And I think the point that Jane made about speaking to the bank...

very very quickly and as soon as you realize there's a problem that's the key to this it's not in our interest to give customers a bad experience and the fundamental point of all of this is to prevent crime well you have been giving a lot of customers a bad experience over the last few years and many of them

a bit on this on this program um david just very briefly one one more question there's also this 13 month time limit why a time limit there isn't one now under the voluntary code well this is about the providing some certainty in terms and encouraging people to come forward

and get moving. What we really want to see is the controls in place to stop this happening in the first place, but it's also about giving people incentive to make the claim as early as possible when it can be more easily investigated and followed up. Yeah, if of course they know they've been defrauded, which they don't always anyway.

come back to that, I'm sure. And that limit will affect, of course, big frauds, but almost the £85,000 limit, but almost all the AP free frauds involve smaller amounts, like Emmeline, who's on the sofa with Dan now. Dan? Yeah, so like you say, Paul,

I've got Emmeline with me here. Emmeline, you had around about £1,000 stolen after being targeted by these criminals with a fake delivery scam. How big a deal was having that money stolen from you? I mean, it was huge. At the time, it's all I had. We were in lockdown. I didn't know when I was going to get paid anything again. And that's how they actually got me, because they knew that I was extremely vulnerable. They knew I was in that position, so they used that against me to scare me.

Yeah, it was massive, massive impact. And what was that like when they were pressurising you into that, panicking you into that? It kind of overrode everything I knew about scams and everything I knew about technology. And even though I was sort of doing my due diligence at the time, the fear was taking over and I was just in that hot state and couldn't see what was in front of me. I mean, as is so often the case with so many victims we hear about on this programme.

You got your money refunded, but your case went a little bit viral on social media and you heard from lots of victims. What were their stories like? Yeah, I mean, I was really fortunate. My bank were very dismissive of me initially. It was only because of the press. using my story that I got refunded very quickly. Other victims that reached out to me, it took like months and months that they were in the dark, didn't know if they'd ever see their money again.

And another part of this mandatory scheme that comes into effect from Monday is a voluntary excess that some banks can charge victims up to £100. You're obviously on the £1,000, still a lot of money, but, you know, it's less. What do you make of that voluntary excess? of £100 that banks can make victims pay. How would that have affected you? I mean, that would have been a huge amount out of, obviously, 10% of what I had, but also I didn't have any money to...

give up front or anything. It would have been a cut out of, I guess, what they would have given me. I don't know. That would have been a big hit for me, personally. And how do you think the bank dealt with your particular case? You've already criticised them a little bit. Tell me a bit more about that, though.

It's funny, I actually gave them some really specific things that they could have implemented that would have stopped me in my tracks in the middle of that scam. And I really thought and had assurances from them they were going to implement them and they haven't at all. So I think there's so much... more they could have done and still could do for future victims well all victims Aaron I mean look what Emmeline's talking about there what Jane's talked about as well we know the financial impact

on on victims but it's not just about that is it you work with a lot of them in your in your line of work yeah so we know it's not just the financial impacts you get this anxiety and confidence that's the after effect but a lot of victims are groomed and what these changes are bringing about and one big thing is

that this is getting the audience being listened to by the banking industry so that they're going to improve those interventions, those preventions. So the big change here is that fraud is going to hopefully be stopped more.

And the level of sophistication in these scams should not be just dismissed. I mean, these can take hours, these can take days, these can take months. And people, I think, as both Jane and Emberlene have said, they were groomed, they were rushed. I mean, these are really sophisticated scams. Yeah, we have to remember that these...

This is an organised crime gang type approach and many occasion they will have patience, they will take time, this is their business. So it won't just be very quick over days, it could be over months. They know what questions are being asked of these victims by their banks, and they're priming them. So that's everybody taking note of those kind of typologies, the way things happen. to help prevent it now going forward. I think that's good advice for everybody. Paul, back over to you.

Thanks, Dan. Well, emails are coming in already, and I have to say Sue has emailed. She was scammed out of over £7,000. She says her bank treated her appallingly. She's a pensioner, didn't reimburse the money, paid her £100 for the appalling treatment. And, as we were saying earlier...

He's gone to the Financial Ombudsman. Good for you, Sue. I hope that works. And, of course, we've also had emails, like we do whenever we cover fraud, about some listeners who ask about personal responsibility, people who are tricked. Should they have been more careful? Here's Lucy. I think anybody can fall prey to these scams. But if you do fall prey to it...

and you are contacted by your bank and told that this could be a scam, I think at that point, the personal responsibility kicks in and you should say, OK, I'm not going to send the payment now. I'll wait a day and I'll think about it. Now, I know it's complicated. because I know...

vulnerable people, maybe people with dementia, etc. That's not so easy. But most of the ones I've heard on Moneybox have been from really intelligent, clued up people who just get groomed by these scammers to make the payments. In most cases, you can say that then their personal responsibility is to listen to their bank.

Catherine Westmore, many people do go ahead, and we heard from Aaron that these thieves are very clever. I mean, how do they persuade people? Even when the banker said, be careful, this is £1,000, do you know this person? How do they persuade people to carry on with the fraud? I think they are just so clever and they are so good at identifying people's vulnerabilities and their weaknesses and exploiting them. I think Aaron mentioned how criminals are using the warnings that banks give you.

and manipulating you into thinking actually they are giving the warning and that you should do exactly what the criminal says despite the warning that you get. And they're using new technologies, things like artificial intelligence, to make their scams more and more real.

They persuade you they're genuine, don't they? And I've come across them where they've said, the bank's involved in this. Don't, for heaven's sake, get in touch with your bank. Now, Ben Donaldson, UK Finance, there is this voluntary code. It's finishing when the new rules start on Monday. And it said that...

It could refuse to pay if customers ignored what it called effective warnings. The new rules say they just have to have regard to any intervention. So that could be gross negligence if they ignore them. Is that a major loophole? So I don't think so. I think the key thing here is that...

customers who think they've fallen victims of fraud should speak to their bank as soon as possible. And we just really encourage them to listen to any advice or warnings from their bank or indeed from law enforcement. And the reason for that is, as Catherine said,

I'd hate to pay them a compliment, but these criminals are very sophisticated and very persuasive. And sometimes it can be very difficult for bank staff and fraud teams to dissuade the victim from making the payment. But it's how you'll treat that. I mean, will you have that sympathy that, well, this is a profession...

They've really groomed you into doing this. You should have listened to us. Now, at that point, do you say, you should have listened to us so we won't pay you, or do you say, we understand how they did this, we will pay you?

So the focus across our membership is preventing crime and supporting the victims of crime. So we will be sympathetic and we'll listen to the concerns that consumers have if they think they've fallen victim. And let me just ask Aaron Chohan about this over on the sofa. Aaron, you're a lawyer.

Is gross negligence a very high bar that the banks have to reach before they can refuse reimbursement? It is a really high bar. The Financial Ombudsman Service has made that clear. It's defined really as significantly careless. have to be phenomenally careless about going ahead with the transaction. So if your bank say, look, we think this is fraud and you go ahead, well, that might class as grossly negligent. But it will be some kind of extreme cases.

That's the level we're working to. We'll just have to see how it works out, I suppose. And David Jeal, you told us 99% of victims would be reimbursed from... Monday. Do you think they've got to obey this consumer standard of caution, a new phrase for us, not ignoring warnings. Do you fear the banks might use that as an excuse to refuse to pay?

No, Paul, this is a raising of the bar. The onus was previously on the customer to prove that they were a victim of fraud. The onus is now on the banks to prove that the customer has ignored some really specific warnings. A general warning is not enough. This needs to be...

something very specific a bank could point to to say the customer has been grossly negligent. And finally, and briefly, we've talked about a lot of new rules. The banks may or may not always follow them, especially maybe some of the smaller ones. How will you enforce them? What powers do you have briefly?

Very briefly. We will monitor, we will investigate if we see it not happening, and we can enforce, which includes forcing firms to take action, includes fines potentially, and ultimately they could be withdrawn from the system. Wow. David Geel, thank you very much. Now, those new rules start on Monday, October 7th, and apply to any money transferred from then. So if you're a victim of this kind of fraud, as we've heard, tell your bank and ask for the money back. And if there's a dispute...

go to the Financial Ombudsman, as our listener Sue did. I'm sure we'll be looking at how the rules work in the future, but for now, thanks to David Jeale, Ben Donaldson, Catherine Westmore, Aaron Chohan, and of course to Jane and Emmeline, who have so courageously shared their experience.

If you subscribe to Moneybox through BBC Sounds, you know you'll also get Wednesday's Moneybox Live. And next up, Felicity Hanna will discuss how to buy a house, deposits, mortgages, costs, solicitors. It's a long list. You can send us any money. Any questions, tips, ideas, thoughts? Moneybox at bbc.co.uk. Or, very exciting, you can now send a message or a voice note on our new WhatsApp number, which is 033 06783 183. That's 033... We read and listen to them all and you might get on the show.

In today's podcast, the reporter was Dan Whitworth, researchers Catherine London, Joe Krasner. Keeping us all on air from the atrium, studio managers Cameron Ward, Matthew Dempsey and Pete Smith, and in the studio, Natalie Ladderley. The studio producer was Sarah Rogers, our editor. is Jess Quayle. I'm Paul Lewis and this was a BBC News money and work production for BBC Sounds. And now, making the world a better place, one coffee at a time. Cafe Hope on BBC Radio 4.

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