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ombudsman news

issue 135

August 2016

ombudsman focus: spotlight on scams

Last year £775 million was lost to financial fraud (Financial Fraud Action UK). As criminals’ methods grow ever more sophisticated, ombudsman focus brings together expert perspectives on scams and how to stop them.

Rebecca Langford, policy lead for older people at Money Advice Service

In October 2015 the Money Advice Service carried out research which found that more than six in ten people had received a suspicious phone call during a 12 month period. And the Financial Ombudsman Service’s review of complaints about phone fraud found that eight in ten victims were aged over 55.

Scammers are clever and will often exploit the latest technology to impersonate genuine organisations, meaning fraudsters are harder than ever to recognise. We need to work together to make sure that everyone has the financial capability - the ability, mindset and connection to advice and financial services - needed to protect themselves.

A core element of the UK Financial Capability Strategy is to help people access information and services when they need them. This can be facilitated by bringing organisations together from across sectors so we have a common understanding of the issues, what we want to achieve and how we will get there. Identifying which initiatives are the most impactful is an essential part of this. That way we can start to improve financial capability.

Unfortunately there is currently very little UK-based impact evaluation of scam awareness programmes. This means we don’t have enough evidence to determine what works best to engage with people about scams to help them protect their finances. With this in mind, we have examined a number of schemes from outside the UK which have been designed to prevent people becoming victims of fraud.

The Daily Money Management programme in the US and the MoneyMinded programme across Australia and the South Pacific are good examples of this. They suggest that maintaining social networks and coordinating different agencies can all help safeguard people against scams.

We will shortly be publishing an evidence review which will provide more detail on ‘what works’ to improve older people’s financial capability, and improving awareness of fraud is part of this. We now need to work collaboratively with organisations across the UK who are engaging with people about scams to identify learning's which can be used to inform future projects.

Further information about the Financial Capability Strategy can be found at

  • 63% of people in the UK received a suspicious call over a 12 month period
  • 7% of the UK population - 3.5 million people - had been victims of phone fraud between 2010 and 2015

Survey of 2,014 people by Opinium carried out 29 September - 2 October 2015

Katy Worobec, director of Financial Fraud Action UK

Financial Fraud Action UK’s membership includes card payment acquirers in the UK, banks, and credit, debit and charge card issuers. We provide a forum for our members to work together on non-competitive issues relating to financial fraud. Our primary function is to facilitate collaborative activity between industry participants and with other partners.

Every day, banks work extremely hard to protect their customers from fraud. As well as the security features customers are aware of, such as the use of three-digit card security codes when shopping online or over the phone, there are also a range of other advanced detection and prevention processes working behind the scenes.

These highly sophisticated security systems stopped £7 in every £10 of fraud from happening last year. But despite the industry’s best efforts, financial fraud losses totalled £755 million in 2015, an increase of a quarter on 2014. Fraud losses on UK payment cards totalled £567.5 million and remote banking fraud losses stood at £168.6 million last year.

We are determined to do everything in our power to stamp out fraud. The industry is continually evolving its response to financial fraud and this includes investing in new detection and verification tools, working with government and law enforcement through the Joint Fraud Taskforce, as well as educating customers of the dangers.

As the industry uses increasingly secure systems to protect customers, criminals are turning to scams to trick their victims into handing over their passwords, PINs, passcodes and even their money. If you are a victim of fraud, where you haven’t authorised the transaction, you will get your money back. But where customers are duped into moving money to fraudsters, banks will make decisions on refunds on a case-by-case basis.

Our message is that consumers should be very cautious about giving out personal or financial information, and organisations holding data need to do all they can to protect people’s private details.

Your bank or the police will never phone you to ask for your PIN or password, ask you to update personal details via a link in a text message or ask you to transfer money to a new account for fraud reasons. Always consider what you are being asked to do. And if you think you have been a victim of fraud, contact your bank immediately.

Kate Hobson and Nick MacAndrews, Citizens Advice consumer experts, give a snapshot of scams reported to Citizens Advice's consumer service

based on 5,030 reported scam cases between October 2015 and December 2015 %
phone 44%
online 33%
mail 11%
doorstep 8%
other 2%
unclear 2%

top five reported scam methods

  • upfront payment fees (29%) - including requests to pay fees to release compensation payouts or loans, and traders disappearing after payments are made
  • fake services or invoices (26%) - including being charged to remove fake computer viruses and fake advertising invoices being sent to small businesses
  • goods not being received (9%) - generally involving purchases made through social media or auction websites, where the scammers are private sellers or based abroad
  • vishing (7%) - including cold calls asking for credit or debit card details to renew a subscription, or for information about personal debts
  • subscription traps (7%) - where people are misled into signing up to subscription services, usually with a free or discounted trial - and scammers then take multiple large payments, often changing their company name

how much money was lost to scams in three months?

total money reported lost £5,926,008
average amount lost per victim £2,620
most money lost to a single scam £300,000
scam channel most commonly reported scam average loss per victim
phone cold calls about fake computer viruses £4,496
online goods purchased not being received £1,304
mail requests for upfront payments to release lottery winnings £5,763
doorstep requests for upfront payments for building, gardening and maintenance work that was never completed £2,953

based on 2,262 cases (45%) where Citizens Advice was able to assess the exact amount of money that had been lost, between October 2015 and December 2015

how did people pay the scammers?

  • over 50% of cases involved debit or credit cards - where victims are more likely to be able to get their money back through chargeback or section 75 claims
  • 16% involved bank transfers - which are convenient for transferring large sums of money quickly, but can make it difficult to trace where the money has gone
  • 6% involved other money transfer and voucher payments - which may be convenient for consumers who don’t want to give their personal details to make payments, but are untraceable or difficult to trace

Michael Ingram, senior ombudsman at the Financial Ombudsman Service

As this ombudsman news highlights, frauds and scams take many different forms. Over the last couple of years we’ve seen a significant increase in cases where people have been tricked into making payments. The circumstances in which this happens are varied - and, it seems, constantly changing - and can involve payments made online, in branch or over the phone.
In general, you need to be a customer of the business you’re complaining about. But in these kinds of fraud cases, we can also look into certain aspects of a complaint about the “receiving” bank the money was sent to.

In most cases though, the money is moved from the receiving bank within minutes - and certainly before anyone realises anything is wrong. Sadly, in nearly all the scams we see, the victim has inadvertently done something that’s helped the scammer. For example, they may have given out their password, or given a fraudster remote access to their computer.

We also see cases where a consumer has made a payment themselves - logging in to their online banking and authorising the transaction to the fraudster’s account. Afterwards, it’s easy to see what went wrong. But it’s not always so easy at the time.

From my experience, it seems scammers are successful because the victim is made to believe something’s gone wrong - and things are out of control. And they’re then told they can do something about it, to regain control.

For example, the fraudster might say there’s a security problem with someone’s account - and persuade them to send their money to a “safe” account, which is of course anything but safe. Or the scammer might phone saying they’re from an internet provider, reporting a problem with the service. The victim’s told what they should do to fix the problem - which usually means letting the fraudster access the computer remotely, allowing them access to online banking.

In other cases, the victim buys something online that never arrives, or sells goods and is never paid. The warning sign is that they’re told to arrange things differently - for example, collecting goods at a “neutral” location instead of posting them, or not using a trusted payment method that provides protection.

Based on the things we’ve seen go wrong, some simple things for consumers to remember are:

  • A bank won’t ever ask you to transfer money to a “safe” account.
  • A bank doesn’t need a PIN or password to stop a suspicious payment - and they can block a card remotely, without taking it from you.
  • An internet service provider won’t ask for access to a computer to fix a problem with a router.
  • Online sale and auction sites rely on the parties being able to prove goods have been posted and paid for. If the buyer or seller wants to do something different, it might be a scam.
  • A bank or the police would never ask you to get involved in a “sting” operation to help them catch fraudsters.
  • A lot of personal information is widely available. Just because someone knows your name, address, date of birth or account numbers doesn’t mean they’re who they say they are.

fake ombudsman

In some cases, we hear that people are getting phone calls from scammer pretending to be from the Financial Ombudsman Service. The scammers falsely use our name to try to persuade people to reveal details about their personal and financial circumstances.

We never cold-call customers, or email or phone people out of the blue to ask for personal information. And we’ll never ask you for money, or pay compensation to you directly.

Mark Steward, director of enforcement and market oversight at the Financial Conduct Authority

One of our priorities at the Financial Conduct Authority is to prevent financial crime, including protecting consumers from unauthorised investment activity and financial fraud.

In 2015 we received over 8,500 reports about potential unauthorised activity. We assess all of these cases and we investigate and take action on as many as we can. This includes taking civil court action to stop activity and freeze assets; insolvency proceedings; and, for the most serious cases, criminal prosecution. Last year, as a result of our actions, 8 people were sent to jail for a total of 32 years, we froze over £2.7 million, returned nearly £1.9 million to victims and secured injunctions and other orders against unauthorised firms and those behind them. We also issued public warnings about 250 unauthorised firms in order to deter potential investment frauds.

Alongside enforcement action, we also run communications activity to increase consumer awareness of investment fraud and the actions consumers can take to avoid it. Our ScamSmart campaign targets those most at risk of investment fraud. It stresses the importance of rejecting unsolicited calls, checking our Warning List and getting impartial advice before making an investment.

The campaign includes advertising, information on our website, press activity and communications through partners, to build further awareness of the risks
posed by investment fraud.

As part of the ScamSmart campaign we created an interactive tool, the FCA Warning List, to help people avoid potential investment fraud. The FCA Warning List is a list of firms and individuals that the FCA knows are operating without its authorisation. The web tool helps members of the public search this list, find out more about the risks associated with an investment opportunity and find out further steps they can take to avoid investment scams. It also highlights that if members of the public deal with firms that are not authorised they will not be able to access the Financial Ombudsman Service or the Financial Services Compensation Scheme if things go wrong. Consumers are also encouraged to check the FS Register, which lists authorised firms and individuals we know about.

Only a limited number of investment frauds will fall within our remit, so effective coordination with other agencies and a continued focus on prevention, including better consumer education, is critical to achieving long-term success in this area. We continue to coordinate our efforts across our supervisory, intelligence and enforcement functions in our work on scams and, in particular, those that are targeted at consumers’ pensions.

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ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.