The devastating failure to stop the online fraud scourge is today laid bare.
A Money Mail investigation reveals how – despite years of worrying warnings – internet fraud has now hit record levels, driven by a surge in investment scams targeted at savers searching the web for better deals.
Sophisticated ‘impersonation’ frauds have also doubled in the pandemic, as scammers run rings around police and the financial watchdog.
Scam scourge: Internet fraud has now hit record levels, driven by a surge in investment scams targeted at savers searching the web for better deals
It can be revealed that:
- Investment scams have surged 164 per cent in just two years — with losses hitting at least £135 million in 2020.
- Yet watchdog the Financial Conduct Authority (FCA) is taking months to act on tips over online scams.
- The Government is facing mounting pressure to make internet firms liable for scam adverts and websites.
- Last year, tech giant Google blocked or removed 123 million financial service adverts worldwide that violated policies.
- Experts say simple banking security measures could slash fraud rates.
- Campaigners fear victims are not being told about their chance to secure a refund from their bank.
- Justice is rarely done – with police prosecuting just 1.5 per cent of fraud reports last year.
Fresh figures reveal the fraud epidemic has reached new heights with victims tricked into transferring a record £479 million last year.
But experts fear the real cost is far higher as many victims are too embarrassed to report it.
There was also a 94 per cent rise in frauds whereby scammers pose as trusted organisations such as the Royal Mail or the NHS.
These impersonation scams cost victims nearly £97 million last year.
It’s a free-for-all
Campaigners have expressed outrage that online giants such as Google and Microsoft continue to take money from scammers to host adverts designed to defraud.
In a damning report published by the Work and Pensions committee this week, MPs called on the Government to legislate to stop scammers running riot online.
Committee chairman Stephen Timms MP said ‘a woeful lack of online regulation’ had helped scammers reach more people than ever before.
He said: ‘The result is an online free-for-all, where scammers can advertise with impunity while the tech giants line their pockets from the proceeds of their crimes.
‘There must be parity across the media to ensure all adverts are regulated and the Government should use its Online Safety Bill to act.’
Mr Timms tells Money Mail: ‘We cannot allow this to carry on. Too many people are suffering and the damage to our financial services industry is enormous.’
Money experts also argue scammers could be stopped by holding online firms to account.
Tom Selby, senior analyst at investment firm AJ Bell, says legislation would be ‘a huge step in the right direction in the fight against fraudsters, allowing authorities to get a grip on the scam-ridden world that increasingly resembles the Wild West’.
Pensioner lost £20k at Christmas
Bond scam: Marlene Goldstein (pictured with husband Danny)
In December, Marlene Goldstein, 83, came across a one-year bond from Aberdeen Standard Investments paying 1.89 per cent.
She filled out an application and transferred two payments of £10,000 to an intermediary account at Bank of Scotland.
But Marlene says after making the transfer she ‘had a feeling that something was not right.’
She tried to withdraw her cash, but never received it. It was then she knew she had been scammed, just before Christmas.
She reported the fraud to Nationwide, but was not refunded as she had not indicated that the transfer was an investment, and so was not shown a scam warning.
Following intervention from Money Mail, Nationwide agreed to reimburse Marlene in full.
A spokesman says: ‘As no error was made by the Society we initially held her liable for the loss.
But, following a review of the case using additional information provided to the Daily Mail, we now have the rationale for why she made this decision.’
Money Mail has been shown evidence that the FCA was warned about a specific online investment scam months before savers were defrauded.
Consumer campaigner Mark Taber estimates he has found and flagged more than 750 online investment scams to the watchdog since the start of 2020.
But he says the FCA can take weeks or even months to list the firm on its warning list. One website he flagged to the FCA did not appear on the watchdog’s warning list until four months later. In that time, one Money Mail reader lost £9,000 to the scam.
Some 1,184 potential investment scam firms were added to the FCA’s warning list last year – up from 573 in 2019. There are now 6,594 names on the register.
Investors should check the FCA list to see if the firm is running a possible scam at fca.org.uk/scamsmart/warning-list.
But research from Nationwide building society found 22 per cent of would-be investors do not know how to check.
Research from consumer group Which? found that many firms on the list had advertised on either Google or Microsoft’s Bing, having paid to appear at the top of search results for terms such as ‘best bonds’ and ‘best fixed-rate bonds’.
The group said adverts remained online for weeks after the FCA issued warnings to avoid them.
It can cost less than £100 to advertise with Google. It has been reported that collapsed investment firm London Capital & Finance paid Google more than £20 million to promote high-risk mini bonds.
Many of the scams online come in the form of fake comparison sites, or ‘lead generators’ that promise to find savers the best rates around – only to pass their details on to fraudsters.
Alain Desmier, who runs advertising intelligence firm Contact State, says a ‘silver bullet’ would be for the FCA to make it a requirement for financial promotion services to be authorised.
He says: ‘Overnight you would have a parting of waves of those who can legitimately do that and those who cannot. If you criminalise the buying of unauthorised leads of would see the oxygen sucked out of it.’
The Work and Pensions committee’s report also said the watchdog needed to raise its game.
It read: ‘We have heard numerous criticisms that the FCA is not effective in stopping scams, punishing scammers or retrieving scam proceeds. There is a compelling case for a much more ambitious approach.’
Many of the scams online come in the form of fake comparison sites, or ‘lead generators’ that promise to find savers the best rates around – only to pass their details on to fraudsters
Central to the misery caused by the fraud epidemic is the battle to retrieve any stolen money.
Most major banks are signed up to a voluntary code that dictates that all victims who have taken care to avoid a scam should get their money back.
But experts fear many victims are not being told about this option, or their right to ask the Financial Ombudsman Service to intervene.
Fewer than half of customers would tell their bank if they were victim of a scam, a survey by building society Nationwide found. Just 55 per cent would tell the police.
Mr Taber says he has spoken to victims who reported the crime to national helpline Action Fraud, but were not told to ask their bank for their money back. He says: ‘They are definitely not being signposted.’
An agreement between banks to fund a pot of money to reimburse fraud victims is due to run out at the end of June. The Payments Service Regulator (PSR) is consulting on what should happen next.
Campaigners say banks should all be refunding fraud victims until they have in place better security checks. They say fraudsters are opening accounts with faked documents far too easily and banks should be doing more to stop suspicious transfers.
After delays, the industry only last year introduced ‘confirmation of payee’ – a security check that means a transfer will only be processed if the person sending the money has the correct name of the bank account receiving the funds.
Yet while most major banks now have the check in place, some – including Metro and Tesco Bank – still do not.
Mr Taber adds: ‘Until you start stopping it at the gateway, the criminals aren’t going to stop doing it.’
But victims are facing a lottery when they try to claim a refund from their bank. TSB has not signed up to the code, but pledged to refund all defrauded customers.
One unidentified bank signed up to the code, refunded just 1 per cent of fraud victims.
Campaigners are also calling on banks to publish fraud reimbursement rates.
Experts want to see the PSR force banks to repay all victims.
Jenny Ross, money editor at consumer group Which?, says: ‘We hear regularly from devastated scam victims – many of them vulnerable bank customers – who have lost life-changing sums of money.
In some cases, their bank has failed to give adequate fraud warnings or to properly assess the vulnerability of the victim — and yet they still refuse to reimburse them.
‘Now is the time to take decisive action by replacing the current voluntary reimbursement code with a mandatory scheme.’
Swindled out of £10k in bond scam
Former historian Ann Merrills’s 86-year-old relative was tricked to invest in a bond paying 4 per cent over three years
Ann Merrills became concerned when a relative invested £10,000 with Credit Suisse.
The 86-year-old had been wrapped up in a con with a scam website posing as MoneySuperMarket.
He was tricked to invest in a bond paying 4 per cent over three years in January.
A broker posing as John Tiner, a member of the board of directors at Credit Suisse, reassured him he could withdraw his money any time within a 14-day cooling off period.
He was sent official looking paperwork, too. Ann, a former historian, reported it to HSBC, which refused a refund as it provided an ‘effective warning’ and didn’t think he was vulnerable.
Ann, 72, says: ‘A man his age didn’t have fraud on his radar. This destroyed his confidence.’
MoneySuperMarket says it is aware of fraudsters trying to use its brand to trick consumers while a Credit Suisse spokesman says it now carries fraud warnings on its website.
Fraud victims are suffering added trauma with the fight to get their money back, and the slim chance that their scammer will ever see justice.
Lisa Mills, senior fraud manager at charity Victim Support, says she has dealt with thousands of victims of sophisticated fraud over the past five years, but can’t recall a single prosecution.
She also says scam victims are not given enough advice on how to lobby their bank for a refund.
She says: ‘[They] still feel they are at a loss. They don’t know who to turn to. No one is telling victims how to proceed.’
The support worker says the banks’ approach was placing the blame on innocent victims.
She says: ‘No one wakes up in the morning thinking they are going to be throw good money away. It is re-victimisation unfortunately.
The financial losses are devastating but it’s someone telling you that you are to blame. We take the opposite view, they have been conned or coerced.’
Pauline Smith, director at Action Fraud, also told MPs that in one year its call handlers had had 222 suicidal victims on the phone.
In its report, the work and pensions committee, recommended the Department for Work and Pensions offered all scam victims support for ‘financial harm and psychological distress’.
Cons can’t lose
Scammers are stealing hundreds of millions of pounds, but are rarely caught or prosecuted.
Graeme Biggar, director general at the National Economic Crime Centre, has said that less than 1 per cent of the nation’s police is dedicated to fighting fraud — despite it being a third of all crime.
Victims have to report a fraud to helpline Action Fraud which can ask police to investigate.
Over the past 11 months, Action Fraud received 396,835 reports of fraud and cyber crime, and only passed 32,032 on to police.
Police figures show that there were only 5,101 prosecutions for more than 325,000 frauds last year.
The work and pensions committee inquiry into pension scams heard 40,000 savers had lost more than £10 billion to fraud since in 2015. Yet there had been just 25 convictions.
An FCA spokesman says: ‘Tackling scams is a priority for the FCA and we have dedicated considerable resources to it over the past few years in both prevention and pursuit.
We will continue to work with any and all bodies involved in fighting fraud and scams to prevent further harm to consumers.’
An Action Fraud spokesman says: ‘Fraud is an incredibly complex crime and something policing can’t combat in isolation.’
The National Economic Crime Centre says the fight against fraud needs more resources. A spokesman says: ‘As a country, we must all do more to combat the evolving threat of fraud.’ ‘
Google says it has been working closely with the FCA over the past year, and has strengthened its verification tests for businesses.
A spokesman says it removed 123 million financial services ads last year, and adds: ‘When ads do not comply with our policies, we take action to remove them.’
A Microsoft spokesman says advertisers must comply with local laws and regulations.
Additional reporting: Amelia Murray
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