The UK’s financial regulator, the Financial Conduct Authority (FCA), has issued a stark warning to banks for failing to capitalise on opportunities to prevent romance fraud, urging stronger protections for victims. In a detailed review of six unnamed retail banks and payment firms, the FCA examined 60 confirmed cases of romance fraud, exposing losses that ranged from £100 to as high as £428,249. This scrutiny comes amid a rising tide of romance fraud, which increased by 9% in the last financial year, with total reported losses exceeding £106 million. According to data from the City of London Police, victims of these scams lose on average around £11,222.

Romance fraud is predominantly a form of authorised push payment fraud. Criminals typically deceive victims by posing as genuine romantic interests, often initiating contact via online platforms—85% of romance scams now start through social media or dating sites. Victims are then manipulated into making payments that are essentially irreversible. The FCA’s review highlighted some particularly distressing cases, including one victim who made 403 payments over a year, losing £72,000, and another who continued sending money for 18 months. In a more unusual example, a victim was persuaded to send cryptocurrency to Iraq, believing it was the only way to reach a supposed partner in the military.

Despite the complexity of combating these scams, the FCA found that while some firms had made substantial efforts to protect customers, others missed clear warning signs and failed to act on chances to prevent fraudulent transfers. Nearly half of the victims did not disclose the true reasons behind their payments when questioned, often because they remained under the influence of the scammer. Notably, 15% of the cases involved repeat victims of fraud with the same banking institution, pointing to a need for banks to adopt tailored protections and maintain ongoing monitoring.

The FCA recommended that banks improve by training staff to more critically question suspicious payment explanations and enhance their monitoring systems. Some firms were highlighted for positive initiatives, such as leveraging data on dating site transactions, tracking new device logins, or identifying high-risk payees to spot potential scams early. One bank reportedly made 11 calls over six weeks to a victim, helping them recognise the fraudulent nature of their relationship.

These findings arrive alongside new legislative measures introduced by the UK government to tackle such fraud more aggressively. Recent laws grant banks the authority to delay and investigate suspicious payments for up to 72 hours—a move designed to protect consumers from scams, including romance fraud. The Economic Secretary to the Treasury, Tulip Siddiq, emphasised the importance of these measures in safeguarding vulnerable communities from the devastating financial and personal impacts of fraud.

The government’s broader Fraud Strategy also signals a comprehensive effort to combat fraud across the UK. It includes plans to improve restitution for victims, streamline communications about fraud prevention, enhance protections on digital platforms, and impose stricter penalties on non-compliant firms. Complementing this is the newly launched Online Fraud Charter, a voluntary agreement with the technology sector aimed at reducing fraud on digital platforms by encouraging firms to recognise and actively tackle fraud risks.

Criminal prosecutions have also underlined the severity of romance fraud. Recently, five money launderers were convicted for exploiting victims through such scams, laundering an estimated £3.25 million. These individuals were sentenced to significant prison terms, underscoring the judicial system’s resolve to hold perpetrators accountable. The case involved criminals creating fake profiles on dating websites to trick victims into transferring funds under false pretences.

Despite these efforts, the FCA’s review reveals that significant challenges remain for banks in identifying and blocking romance fraud proactively. A global survey by KPMG highlighted that pausing and blocking transactions before completion is viewed as the most effective prevention method, yet this approach is not yet universally implemented. The FCA's findings and the government’s evolving legislative and strategic framework collectively aim to close the gaps that allow these scams to persist, signalling a concerted push to protect victims and mitigate financial harm.

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Source: Noah Wire Services