Out-Law News 2 min. read

New figures reveal loss of £236 million through authorised push payment frauds

Businesses and consumers lost £236 million last year through authorised push payment (APP) frauds, new data has shown.

In its annual fraud report, trade body UK Finance said there had been almost 44,000 reported cases of APP frauds in 2017. It is the first time annual figures on APP fraud have been collected.

The largest number of reported cases involved consumers, who accounted for 88% of reported cases and lost an average of £2,784. Businesses lost on average £24,355 per reported APP fraud case.

Earlier UK Finance statistics on APP fraud for the first half of 2017 showed over £100m being lost across 19,370 reported cases, with an average loss of £3,027 for consumers and £21,477 for businesses.

Financial providers were able to return around a quarter of APP losses.

Last month the Payment Systems Regulator (PSR) announced it would put into place an interim industry code to better protect victims of APP frauds by September.  This followed a consultation paper on these frauds issued by the PSR in November 2017.

APP frauds take place where a victim is conned into authorising a transfer of money from their bank account into an account which they believe is controlled by a legitimate payee, but is actually controlled by a fraudster.

“The data and results published in the Annual Fraud Report 2017 are further evidence that APP frauds are on the rise and the statistics are broadly in line with those set out by the PSR in its November 2017 consultation paper,” said civil fraud and asset recovery expert Jennifer Craven of Pinsent Masons, the law firm behind Out-Law.com.

“In light of statistics showing that financial providers returned just 26% of APP fraud losses in 2017, the move from reimbursement on a ‘goodwill' basis to the PSR’s recent confirmation that it will establish a contingent reimbursement model, will provide further comfort to victims of APP frauds,” said Craven.

“The report makes reference to the importance of funds recovery and acknowledges that the finance industry is responding to the ongoing threat of all frauds by working with government and law enforcement to 'better trace, freeze and return stolen funds',” said Craven. "This reinforces the points which Pinsent Masons made in its response to the PSR consultation about the importance of there being better awareness and implementation of civil recovery remedies in the fight to recover a victim's losses."

Pinsent Masons civil fraud expert Alan Sheeley said the report was timely.

“The data and information collated in the report evidences that a change is necessary if the UK is going to combat APP fraud and achieve the aims set out in the PSR’s consultation.” said Sheeley.

“These new statistics come at a particularly helpful time, as the design phase to develop an industry code setting out the rules and circumstances under which payment service providers will, on the proposals' current scope, compensate consumer, micro-enterprise and charity victims of APP frauds involving payments between UK accounts is due to begin,” Sheeley said. "However, as we suggested in our consultation response, barriers to more detailed data-sharing also need to be addressed, both in the interests of education about these frauds and to aid effective civil recovery of lost monies."

Overall, UK banks and card companies successfully prevented £2 in every £3 of attempted fraud last year, according to the report. UK Finance said £1.46 billion of attempted fraud had been prevented.

Unauthorised fraud losses on payment cards fell 8 per cent between 2016 and 2017 to £566 million, although card spending increased by 7 per cent. Card fraud as a percentage of spending equated to 7p for every £100 spent, the lowest level since 2012.

In total unauthorised fraud losses fell 5 per cent to £731.8m, including unauthorised banking fraud, cheque fraud and payment card fraud. The fall came despite a 3 per cent rise in the number of reported cases.

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