UK Finance analysis of nearly seven thousand authorised push payment (APP) scam cases shows that 70 per cent of scams originated on an online platform — highlighting the internet’s significant role in enabling fraud. The new analysis comes as the government published the draft Online Safety Bill this week, to include user-generated content on social media and dating apps but not all economic crime.

With the Covid-19 pandemic accelerating consumers’ shift online, fraudsters are adapting their tactics to exploit this societal change. In 2020, the banking and finance industry saw a jump in online-enabled push payment or bank transfer fraud with increases in investment (32 per cent), romance (38 per cent) and purchase scams (7 per cent).

Drilling down on findings from the new UK Finance dip sample shows that most investment (96 per cent), romance (96 per cent) and nearly all purchase (98 per cent) scams originated online. As it stands, the draft Online Safety Bill will tackle fraudulent investment schemes posted by users on social media – but will not tackle the same scam when digitally advertised or set up through a cloned website.

Impersonation scams, which have also grown significantly in recent months, were the only scams solely initiated via telephone calls and text messaging.

The money lost to APP scams totalled nearly half a billion (£479 million) in 2020, with proceeds often funding serious organised criminal activities, including terrorism, drug trafficking and child sexual exploitation: undermining the UK’s standing as a safe place to live and to do business.

Criminals expertly adapt scams to capitalise on the shift in consumer behaviour and vulnerabilities across digital platforms.

While this week’s news that user-generated content will be included in the upcoming Online Safety Bill is a welcome step, to effectively tackle all online scams and stop fraudsters capitalising from loopholes the Bill needs to include all economic crime for a holistic approach.

David Postings, Chief Executive at UK Finance, said “As more of us have shifted online because of the pandemic, we’ve seen a spike in money mule activity and investment and purchase scams because criminals can target people directly in their homes across online platforms. The banking and finance industry is continuing to tackle fraud on all fronts, but there is a limit to what we can do alone.”

“We were pleased to hear that the upcoming Online Safety Bill will tackle some aspects of fraud, but it won’t protect people from fraudsters’ online adverts and cloned websites. We encourage the government to include all economic crime within the Bill when it is formally introduced. Not doing so leaves a large proportion of the public at high risk of being scammed online, because criminals are experts in adapting their tactics to exploit any loopholes.”

“I welcome the recent steps taken by some online platforms to work with us on tackling this issue. This shows commitment and is evidence of the emergence of greater cross-sectoral collaboration to tackle the root causes of economic crime.”

Recent successful cross-sector initiatives include the industry-sponsored Dedicated Card and Payment Crime Unit working with social media platforms to take down 700 accounts linked to fraudulent activity last year, of which over 250 were money mule recruiters.”

Rocio Concha, Director of Policy and Advocacy at Which?, said “Tackling scams is a complex problem and scam victims are currently failed by a range of businesses – including tech firms failing to take responsibility for fraudulent content posted by criminals.”

“The government has now recognised that the major online platforms we interact with every day have a responsibility to protect their users from scams. They must be given a legal responsibility, through the Online Safety Bill, to identify, remove and prevent fake and fraudulent content on their sites – including an avalanche of adverts and websites posted by criminals.”

“A number of banks are also failing to consistently follow the voluntary code that was put in place to protect customers from bank transfer scams. It’s time for a mandatory system of protections, which is strongly enforced, and for bank transfer scam and reimbursement levels to be published on a firm by firm basis.”

Separately Barclays has revealed the proportion of its customers it refunded after they fell for a  fraud scam, saying it has paid back 74% of claimants in the first two months of this year. The Payments Systems Regulator last year revealed huge disparities between banks, with one refunding 99% of victims partially or in full, while two others only paid back 4% of their customers. The regulator did not disclose the identity of the banks and Barclays has become the first bank to reveal its refund rate.

Gareth Shaw of consumer group Which? said “It’s encouraging that Barclays has taken this step. There is no excuse for other banks not to follow suit.” Barclays’ refunds were made under a voluntary code introduced in May 2019. Other firms signed up to the code include HSBC, The Co-Operative Bank, Lloyds, Halifax, Metro, NatWest, Royal Bank of Scotland, Santander and Nationwide Building Society.”