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17 June 2021

Refunding Fraud Victims with Criminal Cash

Scams have long been an unwelcome and often devasting scourge on the finance sector but, now, the UK Government is considering a proposal from banks that would see criminally-obtained funds be used to refund victims.

Various kinds of scams have increased in number since the start of the pandemic, with a recent YouGov survey finding that of the 1,700 adults asked, one in four were being sent scam attempts on a daily basis. For those aged over 65, this increased to one in three.

The survey also found considerable backing for the refund concept from the public, with 76% of participants voicing their support. However, it is understood that although the scheme is well-supported, the total funds frozen in criminal accounts is just a fraction of the hundreds of millions of pounds needed.

In the UK last year, the total value of fraud reached £1.26bn, while the amount frozen in these criminal accounts amounted to £130m. A host of different scams have increased in frequency since the start of the pandemic, with online shopping scams including fraudulent adverts for: pets, cars, caravans and romance being some of the most frequently reported.

In total, there were 389,328 cases of fraud reported in England, Wales, and Northern Ireland in the 12 months to April 2021 according to Action Fraud, with total losses reaching £1.7bn. People in their 20s were the most likely to become victims of scams due to their time spent online, the report stated.

At present, the burden of refunding customers when criminals steal from consumer bank accounts falls to banks. In 2019, a code between 19 financial brands including banks was signed to ensure refunds for victims of so-called push payment fraud – a scam where customers transfer money directly to a fraudster in the belief, they will receive a product or service.

Despite this agreement, banks failed to agree on a scheme to create a central pot of funds to be used for refunds. 52% of those surveyed by YouGov agreed that banks should reimburse victims of fraud. Meanwhile, 11%, believed it fell to the Government to reimburse victims. Previously, Home Secretary Priti Patel voiced her support for the new refund scheme. A recent report by the Government and banking trade body UK Finance noted that ministers were exploring the idea.

“The Government is also working with the financial sector to unlock suspected criminal funds held in 'frozen' accounts across the financial sector," the report said. "We will consider how these funds could be used, including whether suspended funds can be used to reimburse victims of fraud."
Refunding Fraud Victims with Criminal Cash

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