The Tinder Swindler – Compensation for victims of ‘Romance’ Scams and Authorised Push Payment Fraud?

The technical name for this type of scam is Authorised Push Payment (APP) fraud and involves the fraudster gaining the victim’s confidence or appearing to be someone they trust, such as a lawyer or accountant, then uses manipulative techniques and deception to persuade the victim to send sums of money, often on an urgent and/or regular basis.

As the fraud victim believes the transfer is genuine, the money is often lost before any alarm bells ring and the victim may be too embarrassed to do anything about it. As these payments are usually made abroad it is often impossible to trace or recover what has been lost. Bank transfer fraud has increased significantly since the pandemic as people have spent more time online resulting in millions being lost in cybercrime.

It is extremely important to urgently advise the police and also your bank. You can also report any suspected scamming activity to Action Fraud, the National Fraud and Cyber Crime Reporting Centre. If you have lost money, then that may lead to a criminal investigation by the police.

If criminal proceedings are taken and there is a successful conviction, then the Court can award compensation. However, it can sometimes be difficult to trace the fraudster, particularly if they are abroad, or they may no longer have any assets with which to pay any compensation.

Many victims of this type of fraud are unaware that the banks from where the payments to the scammer are made, have a duty to apply due diligence when looking after their customers’ accounts. As well as having robust security checks, the banks should have processes in place to highlight and act on any ‘red flags’ such as vulnerable customers, regular and high-value transfers, or other unusual or out of character transaction activity.

Where there is a dispute between a bank and a customer who has lost out to a scam, then a complaint can be made to the Financial Ombudsman Service (FOS). FOS will examine the circumstances of the scam and the bank’s response, given that banks will be more familiar with the types of fraud than the customer.

There has been a range of recent decisions supporting customers who have been the victims of these scams, with some receiving substantial compensation.

In late December 2021, the Financial Ombudsman Service (FOS) upheld a complaint against HSBC Bank Plc (HSBC).

The bank’s customer, known as Miss M, lost £7,303 in a ‘romance scam’. She thought she had started a romantic relationship via an online dating site, when in fact she was being scammed. The scammer asked Miss M to make payments via her bank to an overseas account. Two payments were made. It was only when the scammer asked for a third payment that Miss M became concerned and contacted HSBC. HSBC contacted the receiving bank but was unable to retrieve the payment.

Miss M complained to HSBC who rejected her complaint. The complaint was escalated to FOS for their consideration. FOS felt that despite the fact Miss M had authorised the payment, HSBC could have done more to stop the scam. Taking into account the law, regulators’ rules and guidance, FOS upheld the complaint and HSBC were ordered to pay Miss M compensation in the sum of £7,303, plus interest and £200 for the trouble and upset caused.

In another FOS decision, Mr R lost £323,600 from his Lloyds Bank Plc. (Lloyds) in a bank transfer scam. Mr R had been befriended by a woman online, at a time when he was lonely and vulnerable. The fraudster gained his trust and over a period of 2 months, Mr R transferred £323,600 to the scammer’s bank account, also with Lloyds.

Two months after he started making payments to the fraudster, Mr R met with this financial adviser and was told that he might have been scammed. Mr R contacted Lloyds, who recovered £180,697 out of the total amount Mr R had transferred.  Mr R was still out of pocket by £142,902 and Lloyds were not prepared to reimburse the full amount, so Mr R referred the matter to FOS.

FOS found that whilst Lloyds had intervened, they had not done so soon enough. FOS found that the pattern of spending on Mr R’s account was unusual and so Lloyds should have contacted Mr R.

Whilst FOS recognised the challenges that come with transaction monitoring, there is an exception for banks to monitor accounts for suspicious transactions and make contact with customers who are at risk of being scammed.

Even though Mr R had himself authorised all of the payments to the fraudster, FOS found that Lloyds had not done enough to protect Mr R and so awarded him £133,400, interest, and £1,000 for his distress and inconvenience.

Sarah Spruce, Head of the Professional Negligence team at TLW Solicitors comments:

“Whilst it is excellent news for consumers that FOS are often finding in favour of those who have been scammed by fraudsters, due to the failings by the banks, it is concerning that some of those people who have been scammed are clearly not coming forward.

This type of scam could be largely underreported because victims may feel too embarrassed to report this to the police or take any action against their bank, possibly because they feel it is their fault and nothing can be done.

Regrettably, for some people, their whole life savings can be lost to online scams. Romance scams are just one type of banking scam. Other victims lose money by writing cheques to the scammers, are cold-called into making payments online to a fake account, persuaded into parting money in an investment and, more recently, cryptocurrency-related scams – the list is endless.  But ultimately, if your bank could have done more to prevent the fraud, then they may be held liable for your losses, or the losses of your loved ones.”