Britain’s banks see fraud cases spike after refund rules take effect

LONDON, June 15 (Reuters) – British banks recorded the sharpest rise in losses from certain types of fraud since a COVID-era boom in technology-enabled scams, and renewed calls for government action against platforms such as Meta, where many cases have emerged.

Data from industry body UK Finance showed losses from authorized instant payment or APP fraud – including investment and purchase scams where criminals trick victims into transferring money – rose 19% last year to £576.4 million ($772.78 million).

The figures coincide with a review of rules introduced in October 2024 that will require banks and payments firms to pay compensation of up to £85,000 to victims of such fraud. The UK remains the only country to mandate compensation for APP fraud.

Banks returned £354.3 million to victims, according to UK Finance’s annual fraud report, based on data submitted by firms in the sector. Data on APP fraud includes losses not covered by the refund regime.

ADVANCED SOCIAL ENGINEERING

Ruth Ray, director of economic crime at UK Finance, told Reuters that fraudsters are becoming increasingly sophisticated in their use of social engineering with the help of artificial intelligence, expanding the pool of potential victims.

“Given that most APP fraud still begins via online technology platforms or telecommunications, we urgently need to impose stronger, enforceable responsibilities on these sectors,” Ray said.

Janine Hirt, chief executive of fintech lobby group Innovate Finance, said tech firms should help cover repayment costs and introduce tighter controls such as seller verification. Reuters reported last year that internal Meta documents showed the company predicted 10% of its 2024 revenue, or $16 billion, would come from fraud and advertising for banned products.

In Britain, Meta has repeatedly failed to stop illegal advertising for high-risk investment products on its platform, despite promising to do so.

Meta did not immediately respond to a request for comment.

Losses from investment scams, driven by social media posts advertising lucrative returns, reached £221.5 million last year, their highest ever, UK Finance said. Procurement and romance scams have also reached their highest levels, the group said.

A spokesman for the Payment Systems Regulatory Authority, which introduced the fraud refund rules, said: “We have repeatedly called on tech firms to do more to protect their users, and banks and telecommunications providers must also play their part.”

Frontier Economics is independently reviewing the rules and will publish its findings in early July.

($1 = 0.7455 pounds) (Reporting by Phoebe Seers, Editing by Louise Heavens)