Banks finally gear up to tackle money transfer fraud

November 19th, 2018
19 November

When you get on a bus, tram or train you have no idea who your fellow passengers are. Most will be, like you, either going to and from work, shopping or meeting folk socially. But some will be criminals who are on their way to commit a crime.

You may not be able to spot the difference between a regular commuter or the conman/mugger/drug dealer in the next seat. But they may well be there and all they are doing is what you are doing – making use of the system, in this case a public transport system.

It is the same with online money transfer. Banks and financial institutions around the world have established electronic links which people use to access their accounts and transfer money either in or out, and to or from, other accounts which are on the system.

Again, there are criminals using this same system. Wherever you encounter money being moved from one account to another you will also find the potential for criminal activity. Recently I wrote about one of the biggest money-laundering schemes of all time here.

The bank transfer fraud also relies on people making assumptions. In this case, they assume that the email they have just received from the solicitor/builder/businessman they have been dealing with for months is actually from that person.

It looks genuine, relates to a transfer of funds from an account that they have been expecting to make and has all of the right details in place – with the exception that the account number and sort code belongs to an account controlled by a criminal. In most cases, once the money has been transferred it is gone forever. A total of £145 million was stolen from unsuspecting users of the system in the UK in the first six months of 2018.

Currently, transfers are made by providing just two pieces of information – the sort code and the account number that the funds are to be transferred to. Banks and building societies are now introducing technology by July 2019 that will not allow funds to be transferred unless the name of the account holder is also specified. When the request for transfer arrives, software will check that the correct account holder name has been specified – and if the collars don’t match the cuffs, as it were, the transfer will be denied and the person making the payment will be asked to contact the person or organisation they are trying to pay.

About time, says Gareth Shaw, from consumer group Which?, who for years have been tracking the misery that this fraud creates: “Customers will wonder why banks have dragged their heels and not implemented this system years ago, as it could have prevented a significant amount of fraud. With losses to bank transfer fraud increasing drastically it’s clear this measure can’t come in soon enough.”

Our advice is simply this – be vigilant. Constant vigilance is second nature for insolvency practitioners but not everyone has a ‘nose’ for something that doesn’t seem quite right.

And although the new system will be in place next July, don’t assume that the criminal fraternity won’t already be working on a way round it. It’s a system and they are playing it.

If for any reason you, or one of your clients, has been a victim of on-line fraud and it has caused financial problems, get in touch with us.  We can use our skills to advise you on how to deal with a financial hole whilst the fraud is dealt with.