As long as there has been the exchange of money, there has always been fraud. From Hegestratos, the first recorded fraudster in 350 BC Ancient Greece, to Charles Ponzi’s infamous scheme of redistributing investments, to the present day, criminals have always tried to find new and more sophisticated ways to dupe people out of their money.
For a long time the blame has fallen on those who were defrauded, after all, how could they have been so stupid? But the Financial Ombudsman Service has been making noises of late that this could be about to change, especially concerning APPS. Authorised Push Payments (APPs) are a type of scam that encourages someone, either an individual or business, to transfer money from their own account to a seemingly legitimate account. Once this is done, the money is usually quickly transferred to other accounts and out of the country, making it hard to recover.
Earlier this year, news of a scam hitting a cancer patient and her elderly mother losing over £20,000 and their ability to pay for her care home hit the headlines, and wrongly or rightly, the bank claimed it was not liable. At the moment, it’s at the discretion of the bank to decide whether or not to reimburse the defrauded account. Should banks decide that the account owner was careless and grossly negligent for falling for the scam, they may refuse to reimburse the tricked customer.
The Financial Ombudsman Service recently said that this is unfair, hence banks will now have to provide evidence that the consumers scammed were in fact grossly negligent. But before we start playing the blame game, let’s look at the bigger picture.
In 2017, 56% of fraud in the UK was cyber related. These scams aren’t just a promise for fortune from a questionable ‘Nigerian Prince’, but rather, increasingly elaborate and realistic schemes. The reason for the growing complexity of user-targeted fraud is that criminals always pick on the weakest link. Where once this may have been the banks themselves, today banks and building societies have many security protocols in place to help prevent crime. According to UK Finance, they stopped £2 for every £3 in attempted fraud in 2017.
As it’s become more difficult and expensive to target the tech itself, no wonder that the fraudsters are going after customers with renewed vigour, in a manner that would make Hegestratos proud. By manipulating the unsecure behaviour of people, they manage to bypass what are otherwise secure systems. That why the FOS has also warned that people must start adopting simple behaviours, such as not writing your PIN on the front of your credit card or automatically taking unsolicited email communications purporting to be from your bank at face value.
It’s not yet clear how much the burden of responsibility will shift from customer to bank in the coming months, but what’s increasingly apparent is that further user education must be combined with a layered approach to cybersecurity across all business/consumer relationships – i.e. there’s never a single point of vulnerability for criminals to exploit (which of course means no single point of culpability either).
Whether its a combination of two-factor authentication, biometrics, adoption of email protocols such as DMARC (our favourite protocol!), the creation and enforcement of tighter policies and procedures etc, the specifics may differ from organisation to organisation, but the rationale should remain consistent. Namely, we need to make the tech constantly better and we need to constantly make humans less vulnerable – a shared responsibility for improving our defences, rather than assigning blame when those defences are breached.