The top 3 types of fraud and what victims can do

While the confirmation of payee account name checking service introduced in June 2020 assists with this by flagging discrepancies between the name of the intended payee and the name on the bank account funds are being transferred to, it does not work in all cases. Remarkably not all banks have adopted the service, and it is not currently possible to undertake the checks on a transfer to an account held out of the country.

 Victims can be novice investors through to sophisticated financial professionals. 

While there is a contingent reimbursement model (CRM) code, which is intended to protect customers by detecting and responding to APP scams, and to ensure that victims of APP fraud have access to compensation, the code is voluntary and, again, not all banks have adopted it. 

Consumer group Which has collected data about complaints to the Financial Ombudsman Service relating to fraud and claims under the CRM code rejected by the banks. According to that data, almost three-quarters of the complaints considered by the Fos were upheld against the banks.

The too-good-to-be-true opportunity

Typically, larger losses are suffered by victims in relation to investment schemes where investors take a chance on an opportunity offering eye-catching returns. Fraudulent online foreign exchange market platforms and scam crypto platforms are examples of this. Victims can be novice investors through to sophisticated financial professionals.

In the first instance, investors receive payouts in line with what had been promised. Ponzi schemes operate by using later investors’ money to pay returns to the earlier investors, and rely on re-investment and word of mouth to continue. This is similar to pyramid schemes, which have the added incentive of increased returns for investors who introduce more people into the scheme. At a certain point the payments stop and the scam is discovered.

These tend to be the sort of matters fraud lawyers pursue, with famous cases such as Madoff going on some 14 years after the fraud was first uncovered and billions of US dollars recovered and distributed to victims. As with Madoff, today’s fraudsters often target investors internationally and frequently the schemes they operate involve an offshore element. 

Losses suffered by victims in investment scams can range widely depending on when the investments were made in the lifetime of the scam, and the individual’s wealth and capacity for investment. I have seen instances in which people have used life savings and borrowed heavily against property after initial distributions were received at a level that (purposefully) encouraged further investment.

What can victims do?

The avenues available to victims of fraud will depend on a number of factors, not least whether the loss is sufficiently large to engage professionals and embark on an asset-tracing exercise.