Lawmakers Criticise Finance Industry’s Obstacles to Making Fraud Refunds Easier

Justin Freeman

Lawmakers Criticise Finance Industry's Obstacles to Making Fraud Refunds Easier

  • A new scheme that aims to compensate victims of fraud might not deliver on its promises.
  • Conflicts of interest could leave Payment Systems Regulator (PSR) delivering half-hearted reforms.
  • UK MPs and lawmakers push back on the finance industry’s aims and timescales.

New plans to ensure victims of ‘authorised push payment’ frauds are refunded sooner might not be as comprehensive as first hoped. UK lawmakers in the Houses of Parliament have flagged up that leaving the finance industry to self-police might not bring about the desired upgrades as to how retail victims are compensated.

What are ‘Authorised Push Payment’ Scams?

So-called ‘authorised push payment (APP) scams’ have become the UK’s most extensive type of payment fraud. In 2021 they cost customers at least £583m.

That’s thought to be a conservative estimate as the scam targets corporations as well as individuals. Given that the reputational risk of going public discourages many businesses from doing so, industry experts believe the total size of the losses is greater.

As with many of the most effective scams, the APP approach relies on simplicity and catching usually sensible people unawares. In short, fraudsters deceive individuals or employees of organisations, tricking them into sending payments to a scam account. They often encourage action to be taken quickly and make individuals panic before having time to think it through properly.

Banking giant HSBC, in a notice to clients, outlines how APP scams differ from other types of fraud – with APP, “a criminal tricks you into transferring money to them”, as opposed to traditional scams where “criminals get access to accounts and steal money without the account holder’s knowledge.”

Upgrades Might Not Deliver

The proposed upgrade of the compensation system would ensure banks reimburse victims of APP scams within 48 hours. The organisation which would oversee the process and speedier resolution times is the Payment Systems Regulator (PSR).

The Treasury Select Committee has raised questions about how the scheme would work in practice. It flagged up that the PSR is guaranteed by the members of the financial eco-system, which would be effectively left out of pocket by customers being refunded. Harriet Baldwin MP, Chair of the Treasury Committee, highlighted that obvious conflict of interest, saying:

“Putting an industry body in charge of reimbursing scam victims is like asking a fox to guard the henhouse.”

Source: Reuters

With lenders lobbying for some of the bill to be picked up by other parties, there is no clear route for the new programme to come into place before 2024. That means retail investors must remain vigilant and aware of the risks associated with online payments and investing.

People Also Read:

Crowdsourcing information about scam brokers can help others avoid falling into the traps set by disreputable brokers, and you can share your experiences here. If you would like to know more about this particular topic or have been scammed by a fraudulent broker, you can also contact us at [email protected]


Justin Freeman

Latest news

Forex vs Crypto: What’s Better For Beginner Traders?
The crypto and forex markets are two of the world’s most popular among investors and traders. Read more
Three Great Technical Analysis Tools for Forex Trading
You don’t have to be very technical minded to make use of technical analysis in your forex trading. Read more

Safest Forex Brokers 2024

Broker Info Best In Customer Satisfaction Score
#1 73% of retail CFD accounts lose money. Founded: 2014 Global Forex & CFD Broker
Number One Broker
Best Trading Conditions Visit broker
4.9
#2 Blackbull LogoYour capital is at risk Founded: 2014 Global Forex Broker
Number One Broker
BEST SPREADS Visit broker
4.8
#3 AvaTrade LogoYour capital is at risk Founded: 2006 Globally regulated broker
Number One Broker
BEST CUSTOMER SUPPORT Visit broker
4.9
#4 plus500 logo81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008 Global CFD Provider
Number One Broker
Best Trading App Visit broker
5
#5 Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
4.9
#6 Forex Broker eToro Logo76% of CFD traders lose money Founded: 2007 Global CFD & FX Broker
Number One Broker
ALL-INCLUSIVE TRADING PLATFORM Visit broker
4.9
#7 XM LogoYour capital is at risk Founded: 2009, 2015 and 2017 Global Forex Broker
Number One Broker
Low minimum deposit Visit broker
5
#8 FxPro LogoYour capital is at risk Founded: 2006 CFD and Cryptocurrency Broker
Number One Broker
CFD and Cryptocurrency Visit broker

    Forex Fraud Certified Brokers

    BlackBull Logo Small
    FxPro logo
    XM Logo
    eToro Logo
    AvaTrade logo
    plus500 logo
    FXTM Logo
    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.