RUTH SUNDERLAND: As it stands, banks are pretty much the only ones at risk of fraud, but telecom companies and social media giants need to be held accountable as well.
Amidst all the fears about the economy, an industry is booming in the UK like no other.
It is a multi-billion pound business, it is innovative, it evolves rapidly, the leading practitioners are extremely intelligent and enterprising. There is only one problem: the industry is fraud.
No one bother to do a Bonnie and Clyde and physically rob a bank anymore. Why use a gun when a keyboard is a more powerful weapon? The Covid-19 has provided perfect conditions for its flourishing and the numbers bear witness to its rapid expansion.
Take control: Banks want financial fraud included in online mischief bill
In the first six months of this year, there has been a 71% increase in ‘authorized’ frauds, where people are tricked into handing over funds or personal information, with losses of £ 355million.
In truth, fraud is too soft and white-collar a word to do justice to the effects. What is happening is a wave of thefts amounting to hundreds of millions of pounds a year, leaving some victims with their lives ruined and the banks picking up huge bills which are ultimately passed on to honest customers.
The stolen money is used for crimes such as human trafficking, drug trafficking and terrorism.
Much of it goes unreported because people are ashamed of being duped.
They should not. Several senior bank executives have confessed to me privately that they almost fell for a scam – I narrowly missed getting cleaned up myself.
You don’t have to be stupid to succumb: it only takes a moment of inattention. Banks are criticized because many victims are not reimbursed. Less than half of those who have been victims of “authorized” fraud get their money back.
Despite this, High Street lenders devote significant resources to the fight against fraud: NatWest spends more to combat, prevent and reimburse fraud than it does for its branch network.
It has 5,000 employees working in the fight against fraud and money laundering, or one in ten employees in the UK.
What a terrible waste of resources that could be deployed productively.
David Lindberg, managing director of retail banking, describes the UK as a fraudster’s paradise and worse than other places. This is partly, he says, because Britain is digitally advanced, so there are more opportunities for sophisticated flight, and partly because we Brits are very confident.
The internet is plagued with brand cloning scams where fraudsters pose as legitimate financial companies.
Identity theft scams where fraudsters masquerade as Royal Mail, DPD, NHS or HMRC to send fake texts and emails have exploded, with losses of nearly £ 130million over the course of the first semester of the year.
It is not under the control of the banks. Neither is the craze for cryptocurrencies, which are used by crooks to move money quickly.
What can be done? We have all become used to instant payments, but the system needs to be cast sand. A delay of a few hours in clearing risky payments would help curb fraud, and would not be a major inconvenience for real transactions.
Banks want financial fraud included in the online mischief bill. The problem has spread far beyond the banking system. Yet, as it is, the banks are pretty much the only ones hanging on.
Telecom companies and social media giants, whose services and platforms are widely exploited by scammers, must also be held accountable. It is time for the government to bang its head.