UK Finance: New Tax Could Pay for Fraud Losses
Trade association UK Finance has called for a new tax on payments to create a fund that banks can use to compensate victims of fraud.
CEO of the banking lobby, Stephen Jones, made the proposals before a Treasury Select Committee this week, reportedly claiming that a “tiny levy” on each payment could help to break the stand-off between financial institutions and other stakeholders over authorized push payment (APP) fraud.
“Customers will pay if the banks have to pay,” he’s reported to have said. “There’s no such thing as a free lunch here. It’s a question of how can the cost be fairly distributed across the system.”
APP occurs when a scammer tricks their victim into making payments to an account controlled by them. Banks argue that they shouldn’t be responsible for compensating the consumer if they’ve basically met their level of care.
A third of fraud losses in the UK last year were down to APP, amounting to £236m.
However, earlier this year the Financial Ombudsman Service (FOS) revealed that in disputes it is called upon to arbitrate, banks often try to blame customers — which it said is increasingly difficult to do given the growing sophistication of online scams.
The heated debate is part of an overall attempt to draw up an industry code governing how APP victims should be compensated.
Brooks Wallace, head of EMEA for cybercrime and fraud prevention at Trusted Knight, argued that Jones’ proposals could set a dangerous precedent and claimed the banks were trying to “shift financial responsibility to the customer before [fraud] really starts to impact their bottom line.”
“This statement demonstrates two things – firstly, that banks are starting to feel the burden of hefty fraud losses through more sophisticated online crime. Secondly, that they are becoming increasingly unwilling to foot the bill,” he added.
"This is a risky route to go down. While some fraud is not the fault of the bank, often fraud could have been halted if the bank had better fraud prevention in place for its customers. While the banks could argue that losses are down to third-parties — such as payment details being stolen in retailer data breaches — ultimately, financial organizations need to have more rigorous procedures for identifying and stopping fraudulent transactions taking place.”
Source: Information Security Magazine