Banks: Fraud Prevention

Baroness Ludford Excerpts

Monday 20th May 2019 Lords Chamber

Asked by

[Baroness Ludford]

To ask Her Majesty’s Government what further action they propose to take, and for banks to take, to prevent fraud perpetrated on bank customers.

[Lord Young of Cookham (Con)]

My Lords, in 2016, we set up the Joint Fraud Taskforce, including law enforcement, banks and government, to tackle fraud. It has already delivered on initiatives such as the banking protocol, which prevented £38 million falling into fraudsters’ hands and led to 231 arrests in 2018. The Joint Fraud Taskforce must build on its successes and not just make it more difficult for fraudsters to operate but bring them to justice.

[Baroness Ludford (LD)]

My Lords, I thank the Minister for that reply, but I am thinking more of action that banks could take. Let us hope that the, frankly, poor, often dismissive and hit-and-miss response by banks to defrauded customers truly is on the brink of change—and not before time. Since I tabled my Question, my bank, TSB, has issued its fraud refund guarantee, promising not to claim that customers authorised a payment when they fell for a scam. Will the regulator oblige all banks to follow suit?

A new voluntary code comes into force next week, offering the so-called confirmation of payee next year. Will legislation be brought forward if the voluntary code proves ineffective?

[Lord Young of Cookham]

The voluntary code that comes into effect next week will in fact extend to all banks the facility to which the noble Baroness just referred, which has been undertaken by the TSB. As from next week, as long as you have done everything that you should and it was not your fault, you will get your money back. Vulnerable victims will get their money back even if they have not exercised due care. I welcome this not just because it gives added protection to customers, but because it means that the banks will have to pick up the bill, which will add to their incentive to reduce, so far as possible, incidents of fraud.

The noble Baroness then referred to confirmation of payee. She is quite right: at the moment, an electronic payment is processed on the basis of the sort code and the account number. As from later this year, banks will have confirmation of payee—in other words, they will check the name. That means that it will be difficult for fraudsters to intercept funds designed, for example, for solicitors on conveyancing, and misdirect them.