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Funding for bank transfer scam victims extended to December

Funding for bank transfer scam victims extended to December

A temporary funding arrangement for a scheme that reimburses people who are tricked into transferring money to fraudsters will be extended until the end of the year.

In May 2019, UK banks agreed to a voluntary code which states that victims of authorised push payment (APP) scams should be refunded unless they ignored their bank's warnings about the scam or were "grossly negligent" in transferring the money.

But nine months on, there is still no long-term arrangement to pay for these refunds.

At the moment there is interim funding for the code, paid for by several banks. This was originally set to run out at the end of 2019, but last year was extended to 31 March 2020.

And UK Finance, a trade association that represents banks, has now said that this temporary funding will be extended again, to 31 December 2020. It says this will give the Governmment, regulators and the banking industry more time to develop a a "long-term, sustainable funding arrangement" for the scheme.

For full information on the voluntary code, see our Victim of a money transfer scam? You now have new rights with most banks MSE News story from its launch last year.

How does funding for the scheme work at the moment?

The voluntary code commits banks that are signed up to it to a series of measures to tackle APP fraud, such as educating customers about scammers and how they work. It also says banks must try to identify customers who are at higher risk of becoming a victim, warn customers when they've spotted a scam and try to delay payments while investigating potential scams.

It's worth noting the code only applies to transfers between UK accounts. Overseas accounts aren't covered.

This is the way refunds work:

  • If the bank's to blame, it'll give a full refund. Where a bank fails to meet the code's standards, it'll fully reimburse the customer, providing they did everything expected of them.

  • If neither bank nor customer is to blame, the customer will still get a full refund. This won't come direct from the bank though. Where the customer and banks involved in a transaction have met their expected level of care, the customer will be reimbursed from a collective pot funded by the banks – this is the area where the interim funding comes into play.

  • Where there's shared blame, the customer will get a partial refund. The amount depends on who's to blame out of those involved. For example, if you and the banks receiving and sending the money all fail to meet the standards expected, you'll get a third of the money you lost from each bank, but have to swallow the remaining third of the loss yourself.

  • If customers are to blame, they won't get a refund. If customers are found to be "grossly negligent", they won't get any money back.

19 firms from nine different banking groups are signed up to the code, while others have their own fraud policies - for example, TSB has a refund guarantee for victims of any kind of fraud. 

What does UK Finance say?

UK Finance chief executive Stephen Jones said: "The banking and payments industry is committed to defending their customers from fraud and stopping stolen money from going to criminals. The APP scams voluntary code has set stronger standards for payment service providers to help protect customers, however there is a responsibility on all industries, not just banking and payment providers, to do more to stop these criminals from being able to target customers.

"There is strong agreement across our sector that the development of any sustainable funding solution to compensate victims of scams must also include those third-party organisations whose data and platforms are used by criminals to facilitate fraud. The agreement to continue the interim funding arrangements until the end of this year gives important time for this to be agreed and implemented.

"We share the views expressed by the Treasury Committee and Which? that issues of liability and reimbursement should best be addressed by new laws rather than just a voluntary code alone."