Richard Eagling, senior personal finance expert at NerdWallet, presents the problem and what advice firms can do to help clients who may have fallen victim to a financial fraud.
The coronavirus pandemic forced many Britons to put important parts of their lives on hold. From career progression and property purchases to weddings and holidays, national lockdowns in response to the virus disrupted almost every element of our day-to-day lives.
That said, despite such disruption, there was one unwelcome constant throughout the previous 15 months: fraud.
Indeed, UK Finance revealed that adults lost a total of £479 million in 2020 after being tricked into making bank transfers to fraudsters, an increase of 5% compared to the previous year. Worse still, the number of transfer cases recorded in 2020 rose by 22% to nearly 150,000. These concerning figures suggest that fraudsters are developing new and more creative scams, targeting people at their most vulnerable.
While consumers should do all they can to protect their hard-earned money, greater onus must also be placed on the financial services sector – including advisers – to do more when it comes to educating clients about the types of scams being used, as well as informing them about what they must do if they are a victim of fraud.
Knowing the trends
As advisers, it is vital to keep abreast of the latest financial services trends and market changes. And, importantly, this extends to fraud.
We are still seeing traditional scams, such as cold calling or sending fraudulent letters to consumers. However, in recent years, more sophisticated phishing scams have become increasingly prevalent. For instance, professional-looking emails seemingly from a bank, prominent household brand, or even a colleague, attempting to persuade recipients to share sensitive information such as bank account details, usernames or passwords. In some cases, they attempt to facilitate bank transfers.
The techniques used by fraudsters are constantly evolving. As such, advice firms must ensure that they keep up to date with the latest fraud developments and inform their clients of this threat. Whether this is via online tutorials, monthly newsletters, social media campaigns or company blogs, it is vital to make the information as accessible as possible to help clients protect their money.
Informing actions
Unfortunately, even the most educated of clients can still fall victim to fraud. Consequently, advisers will likely need to offer advice as to what can be done to counteract fraud.
Firstly, clients must contact their banks. Notifying the bank should prompt them to cancel bank cards and block any questionable transfers. If they are unhappy with their bank’s response, they should make a complaint. However, if they still have problems with their bank after taking this step, they should also contact the Financial Ombudsman Service(FOS). The FOS will assess their complaint and decide if the bank should correct its actions.
The scam should also be reported to Action Fraud, the UK’s fraud and cybersecurity reporting centre. The organisation will review the individual’s report, and ensure it is passed onto the correct investigative division.
Clients will also inevitably question whether they can get their money back if they fall victim to fraud. In this case, it is important to manage their expectations. Indeed, if the fraudulent transfer took place via a wire service, such as PayPoint or MoneyGram, it can be more difficult to trace and reimburse the victim. However, fraudulent direct debits or bank transfers are more likely to be restored by the bank. Ultimately, though, it is seldom black and white – each case of fraud will be investigated on its own merits. Advisers should ensure this is clearly communicated to clients, in turn helping them to avoid any nasty surprises.
Finally, advisers should tell clients to continue monitoring their bank statements in the weeks following the fraud, when they are more likely to be targeted again. As such clients should be vigilant in making sure the problem does not persist.
Improving faith in the sector
Fraud can have a devastating emotional and financial impact on your clients. Cases of fraud also undermine consumer confidence in the financial services industry and can make individuals reluctant to seek out financial advice. So, it is vital that advisers do what they can to restore people’s faith in the sector.
By ensuring that their clients are educated in the latest fraud trends and understand the best course of action should they fall victim to a scam, advisers can arm people with the knowledge to best protect their money and stop fraudsters in their tracks.
