Burglaries and Cheques are Disappearing
Burglaries and cheques have since 2019 declined 36% and 47% respectively.
Since 2019, Faster Payments and APP Fraud have increased by 34% and 73% respectively.
These trends show that APP Fraud scams will exceed burglaries before 2024.
In 2020, APP Fraud created over 200,000 cases. However this figure does not include 40% of APP scams not reported because of victim embarrassment.
The fundamental cause of this is the move from physical to electronic movement of goods, services and money. COVID has accelerated this by reducing physical movement and increasing the use of technology.
The new burglary is online/social media fraud and the new cheque is faster payments. The loot is now cash and plenty of it. An average scam is worth £3,400. For an average burglary, the burglar would be looking at having to burglar at least three times to simply approach that number.
The swag bag and the mask worn in the cartoons of burglaries have been replaced. The mask has been replaced by a hoody with an oblique face with the scammer hiding behind fake email, texts, phone numbers and web sites; all professionally designed to be similar enough to look just like the real thing. Sometimes they are better than the real thing!
Before faster payments the cheque was dominant and there were a number of safety checks, for example, checking the signature to that of the owners before payment. Whereas today, with faster payments, only 6 banks check to see if the account name being paid into actually matches the bank account of the payee. This is known as Confirmation of Payee (CoP).
Even if you bank with one of these 6 banks, these 6 banks must still authorise the faster payment to banks not using CoP. Meaning, there is only protection for faster payments between these 6 banks. As a result, non-CoP empowered banks are the fraudsters’ choice.
CoP empowered banks making payments to non-CoP empowered banks, is a payment system requirement.
Technology makes computer-based crime highly feasible and inexpensive to run. There are relative low barriers to entry but significant capacity to scale. Fraudsters are able to grow from reaching a few households in a day to 10,000 households per hour.
The law is able to deal with burglaries. Burglary convictions range from 5 to 10 in 100. With real time APP fraud, the convictions are often 5 to 10 in 1,000. What hinders investigations of APP Fraud is that bankers implicitly believe it is the customers’ fault. On average banks only reimburse 40 out of 100 victims.
Faster Payments, unlike Direct Debits and Credit Cards, have no guarantees reimbursements policies for victims.
The outcome is that most fraud investigations centre on the biggest and egregious amounts defrauded. The average APP Fraud is typically under the cost of an investigation. This makes small frauds preferred and as the chances of recoveries are very slim.
To counter the rise of APP Fraud, the victim, anyone with a bank account, should make certain any new payee is legitimate. Equally the victim’s bank (the payer bank) should make certain the payee bank and the payee is also legitimate. This is difficult to achieve as banks rarely collaborate between each other on payments. Banks do keep bank account records for up to 7 years. Information on the owners, locations and payment activities could be analysed to identify fraudsters. All these activities should be done through an investigation centre as burglars like digital fraudsters rarely switch profitable and safe professions.
As they say in fashion:
APP Fraud is the new burglary and faster payments the new cheque.