FCA Reminds Banks on Romance Scams and Fraud

The latest update from the FCA for you;

The Financial Conduct Authority (FCA) found examples of banks going to significant lengths to protect those at risk of romance fraud. But the regulator also uncovered missed opportunities to prevent these scams, which cost victims £106 million last year. One of the cases the FCA reviewed involved a victim losing more than £428,000.

Romance fraud is a growing financial crime, with cases rising by 9% last year. Victims are deceived into sending money to fraudsters who engineer false romantic relationships or friendships. Over eight in 10 cases (85%) start online, particularly through social media and dating websites, suggesting platforms have a critical role to play in preventing fraud and reducing harm.

In its romance fraud review published today, the FCA has set out measures banks and other payment firms can take to protect their customers. These include better detection and monitoring systems, staff training, early identification of signs of vulnerability, and compassionate aftercare.

Key findings:

• Intervention and prevention are made difficult for firms because victims may be ‘under the spell’ of the fraudster and reluctant to accept they are being defrauded. In nearly half (42%) of the cases the FCA reviewed, victims did not disclose the true reason for making a payment when asked.
• Despite examples of good practice, there were multiple instances of firms missing opportunities to identify seemingly suspicious transactions. This indicated that firms could calibrate their monitoring systems to be more effective.
• A key area of improvement is for firms to ensure their staff are trained to spot red flags and critically probe customer explanations. This was not consistent across all firms.
• Many firms are providing a high-level of support, occasionally exceeding the FCA’s expectations, through compassionate and tailored engagement, although this wasn’t consistent across all firms.

Steve Smart, executive director of enforcement and market oversight at the FCA, said:

“Romance fraud is a vicious crime. All too often it is the vulnerable that fall victim. The impact – financially and personally – can be devastating. We recognise the challenge banks and payment firms have in combating this complex crime and this review aims to help them stay one step ahead of the criminals.

“We also all need to be on guard so we can protect ourselves and loved ones by recognising the romance fraud red flags.”

In one case in the FCA’s review, the victim made 403 payments to a fraudster over the course of a year, resulting in losses of over £72,000. The firm’s investigation acknowledged that it had not identified the sustained, out-of-character activity.

Another case involved a victim telling bank staff they intended to send cryptocurrency payments to Iraq, claiming it was the only method accepted by their ‘partner’ in the military.

The FCA also saw positive examples of banks and payment firms going above and beyond. One firm made 11 calls over a six-week period to support a victim, demonstrating a commitment to breaking the fraudster’s hold and restoring customer confidence. Another responded with care to a victim who had recently divorced and was supporting a child undergoing cancer treatment. They proceeded to closely monitor the victim’s account.