Authorised Push Payment (APP) fraud
Good news for victims of financial fraud - why your bank may now have to refund you by law
An important court case, and a government promise to amend legislation so more victims are reimbursed by banks and payment service providers, offers some welcome good news for those who have been hit by fraud.
Being scammed out of your life savings is everyone's worst nightmare and unfortunately, crimes of this type are on the increase.
According to the consumer group Which?, UK victims lose £28,000 every hour to what's known as authorised push payment fraud (APP).
Between July 2019 and the end of June 2021 alone, a staggering £854 million was lost across 306,573 cases. Sadly, only 42% of these losses were returned to the victim.
What exactly is authorised push payment fraud?
One of the fastest growing types of scam, this is where a fraudster tricks someone into making large bank transfers to them by pretending to be from their bank, HMRC or some other official organisation.
Often the person calling will say the money must be moved to a safe account to protect it from an imminent fraud attack and that this must be done immediately.
What protection do I have from APP fraud?
At the moment, banks are encouraged to sign up to a code to voluntarily reimburse people who are tricked into authorising a payment to a criminal, although they are not obliged to.
However, amended legislation, to be introduced 'when parliamentary time allows', will give the Payment Systems Regulator the power to enforce firms to reimburse victims where it deems fit.
Part of the Financial Services and Markets Bill, this means the regulator will be able to order banks and payment service providers to reimburse those who have been victims of APP scams on designated payment systems.
In addition, an important Court of Appeal judgement has further clarified the law in this area, particularly when victims of fraud have been induced to make international transfers to fraudsters' accounts abroad.
How might a recent push payment fraud court case help me to claim against a bank?
In this particular case, Philipp v Barclays Bank UK Limited, the Court of Appeal heard how Fiona Philipp and her husband were victims of an authorised push payment fraud when they transferred more than £700,000 to bank accounts in the United Arab Emirates via Mrs Philipp's Barclays bank account.
Mrs Philipp sued Barclays claiming it had not exercised its common law duty to take reasonable care and skill when carrying out her instructions. Initially, the High Court decided that no such duty was owed, granted a reverse summary judgement to Barclays and struck out the claim.
However, the Court of Appeal ruled that the High Court should not have done this and rejected the submissions by Barclays Bank that it owes its retail customers no general duty to take steps to prevent fraud when executing payment instructions.
Even if Barclays now chooses to settle with Mrs Philipp rather than take the case to court, this is an important development for victims of APP fraud with the clear message that banks should be proactive in their fight to combat fraud and protect their customers.
What does Wards Solicitors' financial services disputes expert, James Taylor, say?
"Recent cases have made it more likely that people convinced to make international bank transfers to fraudsters will be able to look to their bank to recoup their losses.
"For most of my career I have dealt with cases involving instructions to banks. Sadly, elderly, naïve as well as perfectly straightforward people, can be victims of fraudsters who build up confidence with their victims. They then convince them to transfer astounding amounts of money out of their life savings.
"The recent Court of Appeal case of Philipp v Barclays Bank UK will be of great assistance to victims of fraud where they are induced to make international transfers to fraudsters' accounts abroad.
"It will also help people making a complaint to the Financial Services Ombudsman (and indeed to those who have lost more money than the Financial Ombudsman Service can deal with) who will have improved chances of recovering their loss from their bank if their bank has missed warning signs of fraudulent activity."
Get in touch
If you have been the victim of authorised push payment fraud and want help to recover your losses or more information about this area of the law, please contact James Taylor, a specialist lawyer dealing with Financial Services Disputes.