Internet scams have become far more sophisticated since the first days of emails from Nigerian princes, with victims in the UK losing £123m last year alone. The number of victims is also rising, as scams get increasingly difficult to spot. But rather than supporting victims, banks are “washing their hands” of them, says consumer group Which?
Which? is especially concerned about how banks are tackling “authorised push payments” – the term for scams when either a hacker gains access to a victim’s account and moves money out, or the victim is conned into authorising a payment into a hacker’s account.
This is usually achieved via a phone call or email pretending to be from a trusted contact or institution, telling you that you are due to make a payment, or informing you of a change to their account details. This scam can often involve victims losing considerable sums. In some cases, the hackers pose as the victim’s solicitor during a house purchase and contact them when they are due to pay a deposit.
Unfortunately, if you willingly transfer this money, it can be lost forever. The Payment Systems Regulator, which polices the industry, has recently said that banks could do more to identify fraudulent payments, but it has rejected the idea of making banks liable for customer losses through this style of fraud.
“The regulator has finally acknowledged the considerable harm to consumers caused by bank transfer scams,” says Alex Neill of Which?, who last year filed a “super-complaint” with regulators concerning the rising levels of fraud over the phone and internet. “However, it has failed adequately to address the issue of liability and has let banks off the hook, giving them little incentive to do more to protect their customers.”
Some measures are under way to try and prevent this type of fraud. A new “confirmation of payee” system will be introduced, hopefully in 2018, requiring you to confirm the name of the payee and the account details when transferring funds. But even then, the responsibility to protect your money will remain with you, rather than with your bank.
Five ways to foil the fraudsters
• If you are contacted by someone telling you that their bank details have changed, contact them to verify the change. Don’t just reply to the email though – find a reliable telephone number and speak to them. If the person got in touch over the phone, wait five minutes, or use a different phone line to call them, as sometimes criminals will simply leave the line open and then pretend to answer when you try to make a call.
• Before you make a bank transfer, double check you have got the sort code and account number correct. If you transfer the money to the wrong account, there is no guarantee you will get it back. Transfers are based on the sort code and account only, not the account name.
• If you are making a large transfer of cash, consider sending a test amount first. Make one transfer (of, say, £1), then get confirmation that they have received it before sending any more.
• Make sure you have anti-virus and security software installed on your computer. If you aren’t sure what programs to get, check with your bank. They will usually recommend the best security software to work alongside their own internet security. Make sure you update it regularly so it can protect your computer from the latest viruses and malware.
• If you think you have been the victim of a bank transfer scam, call your bank immediately. The sooner they know, the more chance they have of retrieving your money. Note that you can make an official complaint if you don’t think your bank has done enough to retrieve your money. You should also contact the police.
In the news this week…
• Family trusts, a device favoured since the Middle Ages for preventing children from blowing their inheritances, or to protect assets from divorce claims, are going out of fashion, says Vanessa Houlder in the Financial Times. HMRC announced that 162,000 trusts sent in returns for the 2014-2015 tax year, 58,000 fewer than a decade ago. Why? Since 2004, the tax rate has jumped from 34% to 45%, and in 2006 the Treasury imposed a 20% inheritance tax (IHT) charge on assets being moved into a trust, followed by an additional 6% every ten years.
Trusts also only get half the capital-gains tax allowance of individuals. But they still have their uses. Certain assets, such as farmland or unquoted shares in a family firm, as well as transfers of up to £325,000 every seven years, can be put in a trust without attracting IHT. An alternative is to set up a “family investment company”, with family members as shareholders. These have a “number of tax advantages” and allow people to “avoid an immediate IHT hit”.
• If you failed to file your tax return or pay your tax bill by midnight on 31 January, don’t think HMRC will be sympathetic when you say that your cheque bounced, says Tom Gillespie in The Sun. Your only chance of overturning a penalty is if you have one of the following “reasonable” excuses that prevented you from dealing with your tax affairs:
* your partner or close relative died shortly before the deadline
* an unexpected hospital stay
* a serious or life-threatening illness
* your computer or software failed just before or while you were preparing your online return
* HMRC online service issues
* fire, flood or theft
* an unforeseeable postal delay.
• From April, people of any age can withdraw £500 a year tax-free for up to three years from their pension to pay for financial advice, according to new pension allowance rules announced last week, says Carol Lewis in The Times. This amount can be used to pay for any regulated financial advice and is available to holders of defined contribution or hybrid schemes, though not to those with defined-benefit (final-salary) schemes.