Scammers have found a loophole in Britain’s fraud rules – and it leaves your money completely unprotected, writes Dean Dunham KC
We need to make sure the scammers can’t game the very rules designed to stop them
Just when we thought consumers were finally getting better protection from bank scams, the fraudsters have found another way around the rules.
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New warnings highlight the rise of so-called “hybrid” scams, where criminals manipulate victims into using different payment methods or moving money between accounts they control before the cash ultimately reaches the fraudster.
Why does this matter? Because the way you move your money can determine whether you are entitled to reimbursement if you’ve been scammed.
Since October 2024, victims of Authorised Push Payment fraud have benefited from much stronger mandatory reimbursement rules. Broadly, if you’re tricked into transferring money to a fraudster using Faster Payments or CHAPS, your bank will usually have to reimburse you, subject to certain exceptions.
That was a major victory for consumers, but criminals aren’t stupid. When one door closes, they look for another.
One tactic involves convincing a victim to transfer money from one of their own bank accounts to another account they also own, perhaps after being told their original account has been compromised. The catastrophic effect of this is that because the initial payment is between accounts belonging to the same person, it can fall outside the mandatory APP reimbursement regime.
The fraudster then engineers the next stage, and that’s where I think our system gets this wrong, because consumer protection shouldn’t depend on which button a fraudster persuaded you to press.
If two people fall victim to essentially the same sophisticated scam, it makes little sense that one could receive mandatory reimbursement while another potentially loses everything, simply because the criminal deliberately manipulated the payment journey.
We should also remember who we’re dealing with. Modern fraudsters aren’t opportunists sending badly spelt emails from their bedrooms. They operate sophisticated scams using spoofed numbers, convincing impersonation, stolen personal information and increasingly artificial intelligence.
Our regulations need to be equally sophisticated. Banks obviously cannot be expected to reimburse every loss regardless of the circumstances, and consumers still have a responsibility to take reasonable care. But protection must follow the fraud, not the payment method. Otherwise, every time regulators close one loophole, criminals will simply move to another.
Britain has made significant progress protecting scam victims. Now we need to make sure the scammers can’t game the very rules designed to stop them.
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Dean Dunham KC presents LBC's Consumer Hour every Sunday from 9pm-10pm.
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