Bank customers lose record amounts to purchase and romance scams

UK banking customers lost a record amount of money last year to purchase and romance scams, according to new data from trade body UK Finance.

Cases of authorised push payment (APP) scams, where victims are tricked into sending money to fraudsters, rose by 12 per cent in 2023 to about 230,000, fuelled by a 36 per cent increase in purchase scams, where criminals sell goods, such as concert tickets, which never materialise. Such scams made up nearly 70 per cent of all APP fraud and accounted for a record £86mn in losses.

Romance scams, another type of APP fraud, where people are beguiled into sending money to someone they believe they are in a relationship with, also reached record highs in terms of amounts lost and number of cases. Criminals stole a total of £36.5mn last year posing as romantic partners, 17 per cent more than the previous year.

“The criminals who commit these crimes destroy lives and damage our society,” said Ben Donaldson, managing director for economic crime at UK Finance. “The money stolen funds serious organised crime and victims often suffer emotional damage, as fraud is a pernicious and manipulative crime.”

Despite the rise in cases, the amounts lost to APP fraud fell by 5 per cent last year to £459.7mn, while banks and payment companies did a better job at reimbursing victims. About 62 per cent of losses were returned to victims last year, compared with 51 per cent in 2022.

Payment card fraud losses also fell by nearly 10 per cent this year due to the rollout of Strong Customer Authentication, which has helped banks verify customers identity.

The total lost to fraud last year was £1.17bn, 4 per cent less than in 2022, according to UK Finance.

Mike Haley, chief executive of not-for-profit fraud prevention service Cifas, said fraud levels remained high despite being down slightly from a peak during the pandemic.

“This crime devastates individuals personally and financially, and fuels wider crime such as people trafficking, drug dealing and human slavery,” he said.

The fresh data comes ahead of an October deadline by which banks and payment companies will be required to refund victims of APP fraud up to a maximum of £415,000 per claim. The new rules, set out by the Payments Systems Regulator, sparked a backlash from payment companies and drew criticism from economic secretary to the Treasury Bim Afolami.

The Payments Association, a trade body, last week sent a letter to Afolami to express concerns that the new rules would encourage more fraud and drive smaller payment companies out of business.

“What is lacking in these proposed changes is accountability for social media platform where a huge percentage of fraud takes place. The proposed changes don’t address the role of social media platforms, where 60 per cent of APP fraud originates,” said Riccardo Tordera-Ricchi, head of policy at The Payments Association.

Banks have been campaigning to share the cost burden of fraud with telecoms and social media companies. The report from UK Finance found that nearly eight in 10 fraud starts online and that such cases tend to be lower-value scams such as purchase scams.

Mark Tierney, chief executive of anti-fraud coalition Stop Scams UK, said the report highlighted the fact that scams “touch upon at least two if not three of the banking, telecoms and technology sectors”.

“The scale of the problem remains unacceptable and once again underlines the need for further collaborative efforts across industry, public sector and government,” he said.