"Gross negligence" accusations rife in bank transfers

By David Beach | 29 August 2018

The UK's Financial Ombudsman Service (FOS) has released a statement addressing fairness in scam complaints made against banks.

Caroline Wayman, Chief Ombudsman wrote that banks often blame their customers of "gross negligence" despite "gross negligence" being more than just customer carelessness and incorrect account numbers. “The evolution of criminals’ methods,” explained Wayman “in particular, their sophisticated use of technology and manipulative ‘social engineering’ – means it’s an increasingly difficult case to make.”

According to data from UK Finance, banks and card companies prevented nearly £1.5bn being lost to fraud in 2017. The same data showed that more than £730m was still lost to fraudsters, with authorised push payment (APP) fraud accounting for a further £236m.

“You have all of these consumer protections on cards and other financial products but very little on bank transfer, that’s an issue,” says Tom Clementson, director of SMB and consumer at Shieldpay.

The paytech company situates itself between both bank accounts, validating both account holders, layered in to ecommerce platforms or banks for additional security. Funds are not transferred until both parties are happy, money is returned immediately if there is no sale and in the case of a dispute Shieldpay mediates between the buyer and seller and offer an arbitration service.

The Shieldpay story all started with foxykitten49@yahoo.com.

This was the only identifier a friend of one of the founders had on a fraudster on a classified adverts website, who conned him into a bank transfer in order to pay for a car that did not exist. And bank transfers present particularly easy targets for fraudsters.

Commenting on the statement made by FOS, Clementson believes that there’s responsibility from everyone, particularly on the part of the individual.

“It’s simple but I send £1 to ensure it ends up in the right account,” says Clementson. “I had to send money to a friend and the £1 test actually highlighted it took too long so I sent it all via Shieldpay.

“Banks do need to take responsibility. They might not be liable for the money but they need to be proactive with technologies.” 

Those technologies can be "blisteringly easy" and pioneered by challenger banks, he says.

“When it comes to fraud, challengers draw on their prepaid card technology, to offer their blisteringly obvious and easy freeze and unfreeze card function. The big banks haven’t even bothered copying it,” says Clementson.

For Clementson, additional investment in fraud prevention and security technology is a no brainer: it’s one stone for two birds. The big banks can reduce fraud to zero while also creating a new revenue stream in charging people for an additionally secure service. A consumer would be more than happy to pay a small fee for a £30,000 transfer.

“Alternatively, the bank could licence the technology, delight their customers and not charge.”

Another intriguing method in fraud prevention is greater cross-industry collaboration.

“Should there be a central single body or standard instead of five or six? Probably,” says Clementson. “Forums like the Fincrime forum, are really important for allowing firms to share their fraud experiences from across the breadth of the industry.”


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