Financial Services and Markets Bill (Second sitting)

Debate between Sally-Ann Hart and Tulip Siddiq

Committee stage
Wednesday 19th October 2022 Public Bill Committees

[Sally-Ann Hart]

Q It is not a general question, but I want to ask about push payment fraud and APP. If we set a specific amount for APP fraud reimbursement, would a suggested £1 million limit encourage fraudsters to try to act like the victim? Would a limit set that high be an incentive for fraud?

Mike Haley: Yes. One of the issues with a contingent reimbursement model in any compensation scheme is that it is not a fraud prevention initiative in itself; it really just says who suffers the risk of the fraud. It passes the individual loss on to the banks. The emphasis is on a large amount that you could get away with without thinking that you have taken it out of an individual’s pockets; a faceless bank will pay up to £1 million. Any limit of that size reduces any moral questions a fraudster might have about who they are stealing money from.

[Tulip Siddiq]

Q Thank you for coming to give evidence. You do not need me to tell you the amount of money directly stolen from people’s bank accounts through fraud and scams—a record high of £1.3 billion, as you will know. Why do you think we have reached that amount?

Mike Haley: There are three interconnected reasons why scams have reached such frightening proportions. First, the reach of social media and online platforms means that scammers and fraudsters can reach millions of people—marks and vulnerable people—much more effectively.

Secondly, we have seen organised crime turn its hand to fraud because it is a low-risk, high-return crime. Their skills have grown in something called social engineering, which is how they to persuade someone that they are calling from the bank or from the police by impersonating others. They have become very skilled in that.

Thirdly, faster and instant payments mean that once a fraud has been successful, and you mandate a payment through your bank account, it is very hard for banks to tell that that is a fraudulent transaction, because it has been mandated by the customer. Then, there is a network of money mule accounts, which are either accounts that have been set up for those proceeds to go through, or accounts belonging to people who have been duped into allowing their accounts to be used for that money to go through. Instant payments mean that that is untraceable very quickly. I remember investigating a mass fraud—[Interruption.]