/ Money, Technology

Should banks refund victims of online fraud?

Sir Bernard Hogan-Howe

The Times reports that Met Police Commissioner Sir Bernard Hogan-Howe has said victims of online fraud should no longer be refunded by banks if they fail to protect themselves.

With online fraud increasing, this is an astonishingly misjudged proposal from the Met Police Commissioner.

Sir Bernard on bank fraud

The front page of The Times reports that Sir Bernard Hogan-Howe said:

‘If you are continually rewarded for bad behaviour you will probably continue to do it but if the obverse is true you might consider changing behaviour. To be fair to the banks, if one says they’ll do it and the others don’t that’s a competitive advantage.

‘The system is not incentivising you to protect yourself. If someone said to you, “If you’ve not updated your software I will give you half back”, you would do it.’

However, the priority should be for banks to better protect their customers, rather than trying to shift blame on to the victims of fraud.

Reimburse fraud victims

Of course, it’s vital to educate consumers about how to avoid fraud, but suggesting that banks could make people more security-conscious by refusing to reimburse fraud victims risks sending the wrong signal about the banks’ own crucial role in preventing crime.

We know that scammers are using increasingly sophisticated techniques to defraud people out of their money, in many cases beyond the control of consumers.

We believe that banks should be doing more to improve their security processes and systems, share their intelligence to prevent fraudulent activity, and support their customers when they fall victim to crime.

Banks inconsistent with fraud

In September 2015, we found that banks were inconsistent when dealing with fraud. A Freedom of Information request revealed that the Financial Ombudsman Service uphold around one in four complaints relating to fraud and disputed transactions in favour of the customer, stating that in many cases banks have based their decisions ‘on a hunch’, without conducting a full investigation.

The Met has since clarified Sir Bernard’s comments, saying that he also agrees banks need to consider investing more in their security systems. However, if banks did not have to reimburse victims, what incentive would they have to protect their customers from fraud in the first place?

Should banks reimburse victims of online fraud?

Yes (97%, 28,600 Votes)

No (1%, 424 Votes)

Don't know (1%, 403 Votes)

Total Voters: 29,427

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Comments
Brian Capstick says:
24 March 2016

The Banks are creating and encouraging online banking. I’m sure helping to decrease their staffing levels,so without a pause for thought of course if a fraudulent transaction transpires on ones account should automatically be reimbursed…The Banks need to tighten up security and make it a safe practice… Soon we will be asked to pay for depositing money in our accounts…Internet banking is a massive plus for most people.. Tried queuing in a Bank recently?… and most times are referred to a machine whilst there if transaction is viable from it…

Merv Hobden says:
24 March 2016

Firstly, all online transactions are traceable to a source and if money is involved, payment into a customer account. Secondly the law on fraud is badly in need of being rewritten – the burden of proof should be placed on the fraudster to prove that all monies found in his possession or transferred to third parties, were the result of honest gain. If the fraudster cannot so comply, the court will automatically return a guilty verdict. There should be automatic extradition on the submission of a claim of fraud to the courts – this should be a European legal provision. Fraud is always carried out with malice aforethought and should be punished by the full rigor of the law with the normal provision of not guilty till proven suspended – the transaction should represent prima facie guilt to the courts and the accused should be subject to their due process.

Michael H says:
24 March 2016

I refuse to do any form of on-line banking, the reason is because I worked many years ago for a company that became a part of the De la Rue organisation. We designed the Bank Note sorters for the Banks in Scotland, and there were always problems with these machines. The point that I am am making is that on-line banking in all its forms is to reduce “Front Facing Staff” and to pay the Bank’s over paid directors ever larger salaries. There are claims by the banks that the software that they use is “Fool Proof” there is always a possibility that there will be a “BUG” in there software suite that they use for on-line banking, nothing is “Fool Proof”

But that would mean tearing officer’s away from their computers where they are busy selling last nights hilarious or sexual cctv footage to ‘People do the funniest things’ TV shows (or the Sun, the Met’s preferred buyer of their stuff) and actually doing some police work! Now get real, that ain’t never going to happen!

Linda Schofield says:
24 March 2016

Crikey, we’ll be paying the “poor scamsters” for loss of earnings next! My account was cleared of several hundred pounds after my card details were cloned at an ATM on a visit to London. First I knew of it was when my card was not accepted at a local garage on returning home and trying to pay for petrol. It appeared the withdrawals had been made in Rumania!!I always shield my PIN when using any card payment device. If it hadn’t been for the bank automatically reimbursing me, I would have struggled until my next salary payment. Sir Bernard is way off beam here. Disincentives are for the villains, not the victims!

Ian Powell says:
24 March 2016

Victims are generally blameless, banks and businesses that offer online services are the ones to blame. Some including banks, telecom and holiday/accommodation providers have scant security and are slow in reaction to cybersecurity threats/breaches.

This is a very vague topic, because it very much depends upon the type of fraud. If, for example, a transaction occurs that allows the fraudster to circumvent a bank’s inadequate security protection resulting in more money being extracted than the “customer” expected, then I would expect the negligent bank to be held to account and to reimburse the customer.

If, however, a convincing fraudster offers a “customer” a deal that the customer agrees to – buying wine for investment for example – and the requested cost is paid for by debit card but the offer turns out to be fraudulent then in my view no recompense is automatically due from the bank. The customer has responsibility for their decision making – no different to making a purchase of this nature and paying in cash or by cheque.

A question arises if a credit card is used. I believe the issuer of the card facility then has a responsibility to check that the client (the seller) they offer this facility to is legitimate. This does not stop a legitimate trader from then acting fraudulently without initially the knowledge of the issuer. Until it is fair to expect the issuer to know this is happening I believe the customer should take some or all responsibility for avoiding fraud – being careful with whom they deal, being circumspect about too good to be true offers, and so on.

If we make every transaction refundable when a fraudulent offer is involved then a wiley customer can make irresponsible investments and maybe reap the rewards if they turn out well, but claim back from the bank if they are fraud – a “can’t lose” situation and one that I could not support. Who reimburses the “victims”, whether they deserve it or not? You and I, in the end. It is indirectly banks’ customer who pay. Do you want to give your hard-earned money to people making irresponsible financial decisions?

So we need to be much more specific about this topic. “Should banks reimburse the victims of online fraud” we are asked – “vote yes or no”. That’s silly – it depends upon the circumstances.

Abi says:
24 March 2016

It’s obvious you are a banker, if a bank issue’s a merchant bank number to a fraudulent company it’s the bank’s responsibility to make sure any money recieved can be retrieved if deemed fraudulent and the same should apply to debit card transactions.

Mangesh says:
24 March 2016

Agree completely!

That’s exactly why I refuse to vote in this deliberately simplistic Which? poll, designed to generate their desired result. Which? has become little more than a pressure group demanding spoon feeding for the feckless, lazy and stupid among the population. If Which? had their way even idiots who lose their money assisting a Nigerian Prince to transfer his funds would be entitled to compensation from the ‘evil’ banks.
Which?, try doing a poll with this question: “Should banks reimburse victims of online fraud whose own negligence or naivity has caused the loss? You would get a very different result, I’d predict.

Abi, i am not. If you transfer money from your bank account to another account by an instruction to your bank then, unless they know that a fraud is involved, they will simply do what you tell them. That is what you sign up to when you open an online account. Just like you parting with cash, or sending a cheque. You need to take personal responsibility for your actions. I do not see how you can hold someone else liable for what you have chosen to do.

Alesha says:
24 March 2016

[This comment has been removed for breaking our community guidelines. Please don’t make your comments personal about other commenters. Thanks, mods.]

Alesha says:
24 March 2016

And I suspect if you’ve been a victim of fraud, you wouldn’t be so quite to judge and abuse.

Peter Towe says:
24 March 2016

It is simple, don’t bank online until the banks guarantee they will do the right thing!

kel meyler says:
24 March 2016

Once again someone supposed to be in authority who really does not really know what he is talking about.

marc says:
24 March 2016

What does he know about security he only works in the police force. Seriously though I doubt he even covers his pin number.

Scrimshaw says:
24 March 2016

What a fatuous, time wasting remark

Bill johnson says:
24 March 2016

Is BHH is supposed to be on our side in crime prevention.

[This comment has been tweaked to align with our Community Guidelines. Thanks, mods]

Dicky boy says:
24 March 2016

What else do you expect from Hogan Howe

[This comment has been edited to align with our Community Guidelines. Thanks, mods]

Chris Swann says:
24 March 2016

I take online security VERY seriously but a few years back wondered why my account was overdrawn. Upon checking it was discovered that someone in Australia had got hold of my wife’s card details and had gone on a shopping spree.
Only one occurrence and never happened again but just how the details were obtained is still a mystery.

Donald Rooum says:
24 March 2016

In May 2015, I was stupid enough to be conned into paying £250 for a non-existent computer support service in Macedonia. Coming to my senses at 2am I telephoned Santander, whose Section 75 service negotiated a refund, not from the bank or the attempted swindler, but from the Macedonian currency exchange service.

Rafiq ahmed says:
24 March 2016

The met commissioner! Has taken leave of his senses! Of course victims of any kind of fraud, rightfully get there money back. Especially from banks.

Peter says:
24 March 2016

The banks are forcing customers on-line, and insisting on Direct Debits too. They make it really difficult for customers, while easing things for scammers. I like to walk into my local branch, where the staff know me, what better security could you have? Although on one occasion, a staff member, who had known my wife for 25 years, asked her by name if she could prove he identity!

geoff skelton says:
24 March 2016

Hogan – Howe is risking his job with such a ludicrous remark. However since he is extremely well paid and no doubt will get e very substantial pension he really doesn’t have to worry. I am amazed such ill informed people are promoted to these positions. It’s not the first time he has made inflamatory remarks. He needs to consider if he is up to the job.

marc says:
24 March 2016

And guess who the criminals will go after next. I wonder what the bank would say if he was a victim of bank fraud?

Austin Hernon says:
24 March 2016

The banks are responsible for their systems, if they can’t get them right why should the customer have to pay for it.

Huvin says:
24 March 2016

I agree. Sadly unless it costs the banks more to pay out for fraud than it would cost them to improve their systems they will try to avoid this investment. They certainly are the major beneficiaries of the increase in on-line banking transections, lower staff costs etc so it makes sense that they should be the party most incentivised to improve performance. Making the unfortunate victim pay would be the least speedy way of improving the behaviours involved. It is far and away the scammers and the poor bank systems which need more attention. The first from better policing – how can Sir Bernard and his colleagues improve detection and punishment rates, yes even when the crime is carried out offshore – and the second from recognising that with investment it is possible to make such crimes a lot harder to carry out. The customer victims obviously have to play their part too in exercising care but overall are the least likely to have significant influence on the problem; – except by avoiding all “modern” banking activities, which these days is well nigh impossible!

Keith says:
24 March 2016

Contactless Cards are not Safe, they should be scrapped.

pat says:
24 March 2016

its time this police commissioner was moving on

Alan Hearn says:
24 March 2016

It’s not just just the banks that are in favour of online banking, the Government are all for it too & are forcing many into it e.g. those on Benefits, who can least afford to lose any more money under the Tories. Sack this moron now, & tell him he’s not getting his nice fat pension – set an example & stop rewarding the bad behaviour of people in power making such idiotic comments!

Someone somewhere benefits from fraud. Instead of banks just reimbursing victims, a lot more effort needs to be put into stopping the criminals.

In the days when sites had less payment security, we had 3 fraudulent transactions all on different cards. One I can’t remember, one was £10 for a mobile top-up in the UK and one was for 2 items worth £300 to be collected from an Argos store that we noticed immediately and confirmed with Argos that they were still waiting for collection. The police were not interested in catching the criminals.

So instead of Met Police Commissioner Sir Bernard Hogan-Howe shifting the onus on customers, the police need to take more responsibility and put more effort in stopping the criminals in the first place and recovering stolen funds.

Recent radio items have shown that the banks are not using their own security systems and letting scammers have access to funds. If the systems were secure Hogan-Howe may have a point to start a discussion. The system is not secure and customers are being scammed.

Stewart says:
24 March 2016

Think it would be open to abuse if Banks had to automatically refund all fraud. It won’t take long for people to catch on that they can de-frauding themselves knowing they will then get more money .

Alesha says:
24 March 2016

Er, I beg to differ. The law requiring banks to refund victims of fraud has been in place for years and I don’t hear of it being abused in the way you seem to suggest.

Patrick Mewton says:
24 March 2016

Met Police Commissioner Sir Bernard Hogan-Howe should be sacked. If he and his subordinates are too lazy to investigate on-line fraud then they should go and make way for people who are prepared to carry out the work that they are remunerated for. You can bet your bottom dollar that if he was a victim of on-line fraud his subordinates would be working day and night to catch the fraudsters. I am afraid his attitude is only too common amongst public servants.

Barri Adair, Miss says:
24 March 2016

I’m 85 and although I still have all my marbles (I think) I don’t always know if I have enough IT protection. I expect the bank to protect me.