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British banks may face fines over arbitrary decisions about compensating customers


Devdiscourse News Desk United Kingdom
Updated: 15-05-2019 23:32 IST
British banks may face fines over arbitrary decisions about compensating customers

Image Credit: Pixabay

Banks in Britain could face fines if they make selective and arbitrary decisions about compensating customers who have fallen victim to fraud, the Financial Conduct Authority's head of enforcement said on Wednesday. A code of conduct designed to offer greater protection comes into force on May 28. Mark Steward told a parliamentary committee while the code is voluntary: "If we see banks under the code behaving in a very inconsistent way and making selectively arbitrary decisions about what they'll compensate and what they won't ... we might regard that as a very troubling thing.

"And it might give rise to enforcement action if we see significantly poor compliance with the code." Consumers lost almost 93 million pounds ($120 million) in the first half of last year alone due to so-called authorised push payment (APP) scams, one of the fastest-growing frauds in Britain. People are tricked into authorising a payment to an account, either over the phone, online or in person, that they mistakenly believe belongs to a legitimate payee. Police have called scams where the money is fraudulently obtained "the volume crime of the 21st century".

Customers of banks signed up to the latest code of good practice, who fall victim to an APP scam, will be reimbursed if their bank fails to meet the code's standards and if they did everything expected of them under the code. Some banks have yet to sign up. Others have pledged to go further. Steward also told the all-party Treasury select committee's inquiry into an economic crime that banks faced fines that could put their customer deposit base "at risk" if their systems and controls failed to protect personal current account holders against cyber attacks.

The FCA last October fined Tesco Bank almost 16.5 million pounds after cyber attackers exploited deficiencies in the challenger bank's debit card design and financial crime controls. The scammers netted 2.26 million pounds. "I think we imposed a fine that was calculated on the basis of the entire customer deposit base of the bank, to send a message to the banking sector in particular that they really have to get this right because if they don't, potentially, that deposit base is entirely at risk. "The entire sector is dealing with a need to step up and raise the game in relation to these sorts of protection," he said.

(With inputs from agencies.)

COUNTRY : United Kingdom

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