Payments industry needs to collaborate to fight payee scams – Global Banking & Finance Review | #romancescams


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By Duncan Sandys, CEO at P20

Since the creation of money there have been criminals intent on stealing it.

Financial criminals favour payee scams that target vulnerable people at vulnerable times, and since the beginning of the Covid-19 pandemic, scamming activity has grown exponentially.

It’s positive to see the U.K. government outline plans to clamp down on investment fraud and romance scams as part of its draft Online Safety Bill.

However, to tackle the problem globally, the industry needs to work together more closely and create a harmonised, global approach.

What are payee scams?

Payee scams are “authorised” payments where a customer, or “payer”, is duped into handing over money through a scam or misrepresentation of services offered.

They range from fake dating profiles to investment scams designed to lure victims into parting with money, as well as content related to child sexual abuse, terrorist material and racist abuse.

In the U.K., these scams are referred to as “authorised push payment fraud”, while in the U.S., they are more generically referred to as fraud involving an authorised payment.

Payee scams are a global issue; they ruin victims’ lives, and scammers use the money for nefarious purposes.

U.K. victims now lose an average of £7,000 each, a 17 per cent year-on-year increase, with money being used for laundering, financing terrorism, and drug activity.

The Financial Conduct Authority (FCA) estimates that each week over $70 million of funds garnered by fraud is raised to finance terrorism.

Who is liable?

The question as to who is liable for payee scams is tricky.

Duncan Sandys

Liability for an authorised consumer payment involving a payee scam or misrepresentation was, until recently, held by the payer that authorised the payment.

The regulatory environment regarding authorised payments, however, is changing.

In the U.K., a new Contingency Reimbursement Model places liability firmly in the hands of payment service providers. Additionally, new laws have been proposed in the U.K. government’s draft Online Safety Bill, which threaten social media sites and dating apps with huge fines unless they do more to protect people from losing money.

In the U.S., when a payer authorises a payment to a fraudster, liability has been left to the payer. As a result, the assignment of liability occurs via rules established by the payment card schemes or network owners/operators such as The Clearing House (with regard to its RTP network).

Measures the industry can take

We acknowledge that it may not be possible to eradicate fraud completely and no single solution is likely to prevent payee scams, but to quash payee scammers in their tracks, we recommend industry implements a layered defence.

As a first layer, the industry needs to implement accurate, timely reporting. Whilst progress still needs to be made, the U.K. should be upheld as a strong example of where reporting has already paid dividends.

Educating consumers and businesspeople about scams and how to avoid becoming victims should come as a second layer. Above all else, this will help individuals recognise common instructions that are provided for how to send money to fraudsters.

A third and fourth layer include better training for bank employees to help spot potential scams against their customers and incorporating user prompts and suspect transaction screens into the payment initiation process.

Lastly, firms should use powerful analytics to trace the proceeds of scams and identify the accounts of fraudsters as consumers flock to simpler, faster and more convenient ways to move money.

A payment service provider, above all else, should make every effort to understand the problem, and in doing so, will suffocate mule networks and make the job of the fraudsters that much more difficult and expensive.

It’s time for collaboration

It’s positive to see the U.K. government outline plans to clamp down on investment fraud and romance scams as part of its draft Online Safety Bill.

However, this is not just a problem in the U.K., it’s a global one.

To eradicate this threat globally, regulators, governments, social media platforms and payment service providers must collaborate and create a harmonised, global approach: an approach which includes standardised, timely reporting, educating consumers, training bank employees to spot potential scams, incorporating user prompts into payment initiation process and utilising powerful analytics to trace the proceeds of scams to identify the accounts of fraudsters.

It’s only through working together that we can make a difference and alleviate the pain caused to millions of victims across the globe.



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