The pandemic has been profitable for fraudsters. Nearly half a billion pounds was lost to bank transfer fraud in 2020, according to figures released this week by banking trade body UK Finance, a 5 per cent increase on 2019.
Less than half of victims got any of their money back, despite the finance industry’s voluntary code of conduct designed to recompense “innocent victims” of fraud.
Criminals are using increasingly sophisticated methods to con people into transferring cash — known as authorised fraud — with many playing on lockdown fears.
Data breaches and phishing attempts contributed to £784m of losses in 2020 to this type of fraud, where payments are taken from accounts without the customer’s permission. However, technological advances allowed banks to block a further £1.6bn of attempted fraud, showing the alarming scale of the problem.
Katy Worobec, managing director of economic crime at UK Finance, says the banking and finance sector is reaching the limits of what it can do alone.
“In recent years, we have seen the biggest drivers of fraud moving outside the banking industry to other sectors, a trend that has only been exacerbated by the Covid-19 pandemic,” she says. “Criminals are increasingly evading banks’ advanced security systems through social engineering scams that target people directly, tricking them into giving away their money and personal or financial information.”
You may think you’re too smart to fall for a fraudster’s con trick — but some of the examples below may alarm you.
Investment scams made up the highest proportion of authorised fraud losses in 2020, with over £135m lost. With individual losses often running into tens of thousands of pounds, criminals are prepared to invest extra effort into fooling the wealthy to part with their money.
Many have been suckered in by cloned websites of private banks and investment providers offering dazzling returns on very convincing looking investments. UK Finance said that some investors were directed to cloned sites after following search engine advertisements, with some fooled by “best buy” links on fake price comparison websites.
Given the potential sums at stake, investment scammers are prepared to play a long game. Some victims are persuaded to part with more money after receiving a “return” on their original investment, and often do not realise for several months that they have been scammed.
Suli Breaks, the podcast host and spoken word poet, fronted a fraud awareness campaign for Santander last year after he lost money to a cryptocurrency fraud.
“They take a bit of money, then they give you some back, then they ask you to involve a friend . . . There’s often a ring of people who are interconnected. You’re introduced to [other investors] with testimonies, but they’re in on the scam in the same way.”
UK Finance is lobbying the government to use the upcoming online safety bill to hold online platforms and social media sites to account if they host scam advertisements, fake profiles or promote fraudulent content.
“Currently, the tech giants are not properly held accountable for fraudulent content promoted on their platforms,” Worobec says. “In some cases, these firms are even being paid by the criminals to place scam adverts on their platforms. It cannot be right that online platforms are profiting from these scams, while the rest of society is left to pay the price.”
Last year saw a 94 per cent increase in “impersonation scams” where criminals posing as trusted organisations such as banks, HM Revenue & Customs or the police conned the public out of nearly £97m.
Fraudsters have exploited pandemic-related fears to trick victims into parting with their personal details, with fake texts and emails about Covid-19 vaccines or fines for breaching lockdown.
The rise of online shopping encouraged criminals to target shoppers with fake messages about missed parcel deliveries, as well as posing as broadband companies or software providers to target homeworkers.
Many banking customers fooled into transferring cash to a “safe account” have been reassured that the phone number the criminals are calling from matches the number on the back of their bank card — but this is a form of deception known as “number spoofing”.
“UK Finance is working closely with the telecommunications sector to mitigate this threat, including a successful initiative with the mobile phone industry to block scam text messages and work with telecoms regulator Ofcom to prevent criminals spoofing the phone numbers of trusted organisations,” Worobec says.
To launder the proceeds of crime, criminals have been using fake online job ads to target young job seekers who are desperate for cash. Lured with the promise of easy money for acting as a money transfer agent or “local processor”, in reality they will be a “money mule”, transferring the proceeds of crime through their account in return for a cut.
FT Money Clinic podcast
The dangers of being a ‘money mule’
Even if mules avoid a criminal conviction or fine, their bank accounts will be frozen, and as banks share information on fraud, they could find it impossible to open another one. The associated damage to their credit file could prevent them from getting anything from a phone contract to a mortgage in years to come.
Follow Claer Barrett on Instagram @ClaerB to watch a short video on how to avoid eight common online scams