Banks should not assume fraud victims are at fault, according to a UK watchdog

Banks should not assume that customers have been negligent when they fall for scams peddled by increasingly sophisticated fraudsters, Britain’s financial ombudsman said on Wednesday.

The ombudsman, which deals with disputes between banks and their clients, said lenders regularly say they are not liable for money a customer has lost to fraud because that customer acted with “gross negligence”.

“But it’s not fair to automatically call a customer grossly negligent simply because they have fallen for a scam,” said Caroline Wayman, chief ombudsman and chief executive of the Financial Ombudsman Service (FOS).

She said if banks could not support their assertion with facts, the ombudsman would likely conclude that the banks should cover the lost funds in cases the ombudsman considers.

The FOS said banks should take into account how fraud and scams have developed given that criminals employ increasingly sophisticated methods and technology to trick customers into handing over funds or personal details.

The ombudsman said earlier in the year it became aware of a scam where fraudsters were contacting people pretending to be the FOS, even making their number appear as the caller ID.

More than 730 million pounds was lost to fraud last year, according to data from industry body UK Finance, a 5 percent fall compared to 2016.

UK Finance said banks and card companies prevented instances of fraud worth 1.5 billion pounds.

“Banks will always make every effort to help a customer recover any stolen funds and the industry has introduced new standards on how banks respond to scam victims,” said Katy Worobec, managing director of economic crime at UK Finance, which represents banks.

The ombudsman said in the past the banks did not have the appropriate measures in place to stop a particular kind of scam where fraudsters dupe people into authorising transactions themselves.

Known as authorised push payment scams, banks often say they are not responsible for covering customers’ loss because the customers authorised the fraud.

The ombudsman pointed to UK Finance date showing that there were 43,875 reported authorised push payment scams in 2017, with a total value of 236 million pounds.

It said the industry and consumer representatives were producing a new code of conduct for banks to adhere to when scams are reported, which was due for public consultation in 2017, and it would start taking this into account in its decisions in a couple of months.