The Financial Ombudsman Service has noted a “dramatic rise” in complaints by consumers concerning financial scams and fraud. With the hope of embuing safer financial habits and a reduction in these types of complaints, FOS reminds consumers to be careful, but also expects banks to respond fairly and effectively to customers’ complaints.

The statistics

The FOS has recorded a 66% increase in new fraud/scam-related complaints to its dispute resolution service. During the Q2 2020, FOS received a little over 3,000 complaints. In comparison, during the Q2 2021, consumers made over 5,000 complaints to FOS.

The most common report was authorised push payment fraud, where customers are contacted by fraudsters masquerading as financial institutions and convinced to transfer money to accounts controlled by scammers.

UK Finance (a trade group) reported that £754 million in total was stolen through fraud during the H1 2021, representing a 30% increase on the first six months of 2020. Push payment fraud losses totalled £355 million in the H1 2021, an increase of 71% since last year.

FOS also identified a growth in cryptocurrency related complaints, although it has not yet published figures on this emerging trend. UK Finance intelligence also suggests there has been a rise in cryptocurrency wallets being used as a vehicle to transfer stolen money out of the banking system quickly. Virtual currencies such as cryptocurrencies are presently largely unregulated. However, the FOS investigates complaints about banks that refuse to reimburse customers who believe they have been a victim of a cryptocurrency crime.

FOS observed that “Although most activities relating to cryptocurrencies are not in our jurisdiction, we have started to see them feature in complaints involving fraud and scams, with many linked to scam investments“. This may be due to the significant increase in time many people spent on social media during the pandemic, where scams are often advertised.

The approach of financial institutions

The FOS stated that it upheld three quarters of the push payment fraud complaints received between April and June 2021. The implication of this is that FOS believes banks and other financial institutions still need to take greater steps to ensure they are resolving customer complaints in relation to scams fairly. UK Finance has recently acknowledged that banks could do more. A spokesperson for the group commented that “A significant amount of money is reimbursed to victims of fraud, but we know that more needs to be done, which is why we are calling for the authorized push payment code to be a regulated code, backed by legislation. This will help provide more consistent outcomes for customers and ensure that the code applies to firms across the banking and finance industry“.

Financial institutions should continue to keep under review their policies for preventing and dealing with financial fraud and scams, educating their customers on the risks, and handling fraud-related complaints, in order to identify areas for improvement. For those that have not signed up to the voluntary Authorised Push Payment Scam Code, it may be useful to consider the code for best practice principles that can be implemented. It is also worth considering what dedicated approaches for dealing with cryptocurrency related scams are required, given fast growing targeting of such investments at consumers, which is resulting in greater susceptibility to fraud and scams in this area.