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UK financial fraud increased last year, driving losses to a four-year high despite recent reforms to tackle the problem by requiring refunds for consumers who are tricked into transferring money to criminals.
Rapid growth in investment scams, romance fraud and ecommerce hoaxes pushed up overall losses from UK financial frauds by 4 per cent last year to £1.28bn, according to data provided by banks and payment companies to trade body UK Finance.
The figures will intensify pressure from banks for the government to force tech groups to crack down on fraudulent activity on their social media sites and messaging platforms, which were the source of two-thirds of authorised UK financial fraud last year.
“It is wholly wrong that other sectors are knowingly profiting from fraud and scams due to loose controls around advertising, allowing criminals to prey on victims via their platforms,” Ruth Ray, managing director of economic crime at UK Finance, told reporters.
“We certainly are shocked,” she said, adding that fraudsters were using AI to develop more potent scams and recent regulatory changes had done little to tackle the problem. “I think it’s clear that we can’t continue to keep doing the same thing and expecting a different outcome.”
The number of financial fraud cases rose 11 per cent to a record high of almost 4.1mn last year. Ray said some frauds were not reported “so this really is the tip of the iceberg”.
Losses from authorised fraud, in which consumers are tricked into sending money to a criminal, rose 19 per cent last year to £576.4mn.
This increase raises questions about whether significant reforms of the rules for reimbursing victims of such scams were working as intended when they were introduced by the Payment Systems Regulator to tackle the fraud problem almost two years ago.
The new rules came into force in October 2024, requiring banks and payment providers to reimburse consumers for losses up to £85,000 that stem from “authorised push payment” frauds in which people are tricked into making a payment to a criminal.
UK Finance said its data for authorised fraud covers a wider range of payments than those covered by the new reimbursement rules. But Ray said the new regulation “does absolutely nothing to prevent fraud from occurring in the first place”.
The PSR, which is being folded into the Financial Conduct Authority, said more than £200mn of money lost to authorised payment scams last year had been returned to victims.
“Fraud continues to have a significant impact on consumers,” it said. “Together with the FCA, we have consistently called for tech firms to do more to protect their users, while banks and telecoms providers must also play their part.”
AI was enabling criminals to deploy more sophisticated scams faster and on a bigger scale, Ray said, adding that this was leaving consumers more vulnerable to financial hoaxes.
“AI is certainly a reason why we’re seeing an industrialisation of the fraud threat, particularly in respect of investment scams,” she said.
Investment scams were among the fastest-growing types of authorised fraud last year with losses increasing 40 per cent to £221.5mn.
Losses from advance-fee scams, in which criminals convince consumers to pay money upfront to secure a bigger payout or benefit in future, rose 65 per cent to £58.4mn.
Romance scam losses were up 23 per cent to £39.2mn. But “CEO scams” involving the impersonation of a top company executive fell 53 per cent to £5.6mn.
“These can be a series of manipulations over months and even years,” said Ray. “We’ve even known situations where romance scammers have even married their victims to perpetuate a fraud.”
Losses from unauthorised fraud, such as card theft, counterfeit cards, or account takeover, fell 5 per cent last year to £703.4mn. UK Finance estimated its members had prevented £1.33bn of unauthorised fraud, up 12 per cent from a year earlier.
