Much of the latest Financial Ombudsman Service (FOS) newsletter is dedicated to the organisation’s handling of fraud cases.

Chief ombudsman Caroline Wayman said that these cases can be some of the most difficult that her organisation has to handle. This is because they often arise a result of the actions of a criminal third party, leading both the firm and the customer to have a strong case for arguing that they were not responsible for what happened. For example, if a customer is duped by a sophisticated fraud into transferring money out of their bank account, but the bank merely acts on the customer’s instructions to transfer, has the bank really acted unreasonably?

Trade association UK Finance says that banks and card companies prevented almost £1.5 billion of fraudulent losses during 2017, however losses of more than £730 million still could not be prevented. UK Finance initiatives that limited the scale of the problem included the Banking Protocol – a rapid response scheme that allows branch staff to alert the police and Trading Standards to suspected frauds. This Protocol is said to have prevented £25 million in fraud in its first year of operation and led to 197 arrests. UK Finance also sponsors a specialist police unit, known as the Dedicated Card and Payment Crime Unit, and this Unit is said to have prevented almost £30m in fraud during 2017, in addition to securing 89 convictions.

Richard Emery, an independent forensic fraud investigator at 4Keys International, focused his comments in the newsletter on the extent of authorised push payment (APP) scams and fraud. APP scams are where consumers are tricked into transferring sums of money to a fraudster’s bank account. Mr Emery believes that some 200,000 individuals, charities and small businesses have fallen victim to APP scams and fraud since 2014, and that 50,000 of these victims have lost an average of £20,000 each.

The newsletter also gives details of how the FOS adjudicated five cases of alleged bank fraud, and how in four of these cases it instructed the bank to re-imburse the customer. Ms Wayman suggested that in many cases the FOS may deliver an outcome that is favourable to the customer, commenting both that “gross negligence is more than just being careless or negligent”, and that due to the increasing sophistication of the criminals’ methods, the firm’s attempts to demonstrate gross negligence are often “an increasingly difficult case to make.”

Pat Hurley, lead ombudsman and director of casework at the FOS, makes similar comments in the newsletter when he says:

“The increasing sophistication of scams means that the bar for gross negligence is high – it’s more than just a test of whether someone was careless.”

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