Bank customer loses thousands of pounds in takeover fraud

In the latest example of takeover fraud, a customer of the Royal Bank of Scotland (RBS) had more than £4,300 stolen from her account despite the fraudulent caller answering one of her security questions incorrectly.

What is takeover fraud?

Takeover fraud happens when a criminal uses another person's account information (e.g. a credit card number) to buy products and services. Takeover fraud is also used by scammers to extract funds from a person's bank account.

With more than 24,000 reported cases, takeover fraud increased by 7% last year with bank accounts the most popular target.[1]

What happened in this case?

According to a report by BBC Watchdog Live, the bank maintained that the customer was aware of the transaction and refused to refund her. To make matters worse, the Financial Ombudsman Service - which helps to sort out disputes between financial businesses and their customers - backed RBS after the initial complaint.

However, following a BBC investigation, was revealed that in a recording of the fraudulent phone conversation, a woman can be heard incorrectly answering a security question.

What's more, a second transaction request made during the same phone call was refused after the caller was unable to answer additional security questions. This eventually led to a warning being raised against the account. The bank's records also show that the fraudster failed the bank's voice recognition checks and that the transaction was marked as a "potential account takeover".

Despite this, a transaction of £4,318 was approved by the bank in a decision which it refused to reverse.

RBS has now apologised to the woman and issued her a full refund. However, it is unclear whether this would have happened without the Watchdog Live investigation.

Worryingly, the bank failed to consider the evidence in this case, including warnings raised by its security processes.

A new code of conduct

Since the con took place, most banks have signed up to a new code of conduct which provides an additional layer of protection to customer affected by bank scams. The new code is designed to minimise the number of financial cybercrimes by encouraging consumers to remain vigilant.

In essence, the new code means that a bank (or another financial provider) can only refuse to reimburse stolen funds where the customer has shown a very significant degree of carelessness. In this case, as the bank failed to heed the warning signs and the woman was in no way negligent, RBS would be liable for the subsequent loss.

Furthermore, under the new guidelines banks should not automatically blame the victims of increasingly sophisticated scams and must take a fairer approach to compensation. What this means is that you can be confident that any claim for reimbursement will be given fairer and quicker consideration.

The code is expected to be finalised next year.

Cybercriminals are becoming increasingly sophisticated

Online criminals are becoming increasingly sophisticated. And it's not just lone hackers people should worry about. Today, cybercrime syndicates are evolving from existing criminal structures. And, as they strive to become as rich as possible, these criminals are sharing information and collaborating.

As such, banks must make sure that their processes are just as sophisticated and robust.

In this case, it was revealed that the woman's phone line was diverted to a mobile number on the day of the call. This led to the bank to believe that they were speaking to her at her home address. However, if all the other security checks and processes had worked, the woman would not have been left without her funds for over a year.

Can you get help for takeover fraud?

If you have been the victim of a takeover scam and need help getting your money back, there is some good news.

As well as setting out a new industry code designed to minimise the number of scams by encouraging consumers to remain vigilant, the new industry protections will help victims to secure compensation.

If you need legal help following a takeover scam, Hayes Connor can help. Our professional, friendly team will be pleased to answer any questions you might have, and advise you on what to do next.

[1] Cifas