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Fraud Insights: COVID-19 sees increased Authorised Push Payment frauds

Posted on 4 February 2021

UK Finance's Half Year Fraud Report, published in September 2020, highlighted that the number of individuals impacted by fraudulent behaviour online is on the rise, with fraudsters increasingly taking advantage of the general uncertainty caused by COVID-19 to target victims' vulnerabilities. While the number of reported frauds due to unauthorised transactions was static compared to same period in 2019, the first half of 2020 witnessed a 15% increase in the number of reported cases of fraud by authorised push payment (APP).

Purchase scams were the most prevalent form of APP fraud in the first half of 2020, accounting for 57% of all reported cases. In this fraud, the victim pays in advance for goods or services, (usually advertised through an online platform such as an auction website or social media), but never receives them. Fake sales of holidays, concert tickets and low-priced technology were common examples of fraudulent purchases in 2020.

The largest increase on the previous year was APP fraud by false impersonation. Impersonation fraud occurs when fraudsters convince individuals to make a payment to an account associated with a trusted organisation, such as the police or a bank. In the first half of 2020, impersonation fraud rose sharply by 94% compared to the previous year, with over 8,000 cases reported. In particular, the last year has seen cases of criminals deceiving their victims by posing as officials offering Government grants to assist with the economic impact of COVID-19.

Kathryn Garbett, a Partner in the Fraud Defence and Business Disputes Team says:

"Unfortunately, the exploitation of the uncertainties and fears caused by the COVID-19 pandemic by fraudsters is not surprising. The surge of APP fraud conducted via social media platforms is a reflection of fraudsters adapting their methods and utilising technology to take advantage of new opportunities. It is clear that with the ongoing restrictions and lockdowns, people will be spending much more time online, which in turn will provide even greater opportunities for fraudsters to deceive individuals and businesses.

"Where an individual or organisation finds they have fallen victim to a fraud, they should immediately inform their bank to try to freeze and reverse the transaction where possible. If the bank is unable to help, liaising with a specialist fraud solicitor as soon as possible to obtain disclosure orders and freezing orders on the recipient's bank account could make a huge difference in being able to recover the funds. Speed is always of the essence when faced with fraud. Customers should not assume that their bank will refund them for these transactions. Despite the existence of the Voluntary Code on Authorised Push Payment scams, it remains a voluntary code and delivers a commitment only from those who sign up to it. As noted in the report, in the first half of 2020 a total of £207.8 million was lost to APP fraud. However, during this same period the total sums returned to customers was £73.1 million. There is clearly a significant number of losses that are not being refunded by the banks, and those victims are left to pursue their losses through other means."  

Freya Mead, Trainee Solicitor in the Fraud Defence and Business Disputes Team says:

"Individuals and businesses should remember that fraudsters are often extremely persuasive and experts at impersonating trusted organisations and the police. Before transferring funds to a third party, it is important to be alert to the possibility of fraud and to take the necessary precautions. A deal that seems too good to be true, or feeling rushed or panicked into making a payment before having a chance to consider properly the relevant opportunity are typical signs of a potential fraud. Always take the time to consider the information provided to you and check whom you are dealing with by undertaking background checks on the internet. The Confirmation of Payee system is also an important tool in checking that the payee's account name matches with the account number and sort code provided. If there are any inconsistencies or question marks around the transaction, then take the time to investigate further before making the payment."

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