FOS says figures from UK Finance show banks and card companies prevented nearly £1.5bn of fraud in 2017 but more than £730m is still lost, of which a third is down to APP activity.

This includes fraudsters setting up fake websites that look identical to banks’ online systems, or sending text messages that to all intents and purposes look like they are from someone’s bank. There are also instances of individuals and businesses losing money as fraudsters join the message thread of a conversation people had been having with their actual bank, or intercept transactions for property purchases with solicitors.

Research by the Payment Systems Regulator has discovered that there were 43,875 reported cases of APP scams last year, with a total value of £236m. Most (88%) of the victims were consumers, who lost an average of £2,784. The rest were businesses, who lost on average £24,355 per case.

Richard Emery, independent forensic fraud investigator, 4Keys International, said: ‘Based on the figures published for 2017 I estimate that in the five years since 2014 over 200,000 individuals, charities and small businesses will have been victims of APP scams and fraud.

‘The majority of these are most likely to have been low- value consumer purchases in response to scam internet offers that turned out to be, quite literally, too good to be true.

‘But this leaves an estimated 50,000 victims who have suffered irrecoverable losses totalling around £1bn, an average of £20,000 each.’

FOS highlights the difficulty consumers and businesses currently experience in getting compensation from their bank for this type of fraud.

Pat Hurley, lead ombudsman and director of casework, said: ‘People who have fallen victim to scams will often tell us they felt they had no option but to do what they were told by the scammers. At the same time, banks often tell us they believe their customers have been “grossly negligent” in handing over personal details to scammers – enabling the scam to occur.’

FOS says that in assessing whether or not someone has been grossly negligent it will consider the environment that was created by the fraudster for the consumer – essentially the ‘spell that was cast’.

‘As financial services change, and scams evolve with it, what’s considered grossly negligent behaviour will inevitably change too.

‘The increasing sophistication of scams means that the bar for gross negligence is high – it’s more than just a test of whether someone was careless.

‘But, like all complaints, if present-day scams have any silver lining, it may be that they can help the financial services sector with its prevention work. And they can also help regulators and the ombudsman service keep in step with what it’s fair and reasonable to expect from financial businesses and their customers when it comes to protecting their money,’ Hurley said.

The Payment Systems Regulator is currently developing a new code that the financial services industry must adhere to when people report scams, which will include specific reference to APP fraud. It is set to consult publicly on this next month, with the aim of launching the code in early 2019.

Report by Pat Sweet