FCA warns of rise in scams in cost of living crisis

More than seven in 10 (73%) people in the UK have been targeted by scammers over the past three months as fraudsters attempt to take advantage of the cost of living crisis, according to figures cited by the FCA.

The regulator has warned that financial crime is to become “even more prolific” as rising living costs continue to impact households around the UK.

Speaking today at the Financial Crime Summit in London, FCA executive director, Sarah Pritchard, delivered a speech that compared “financial con artists” to the COVID pandemic, and described fraudsters as a “complex and ever-evolving enemy”.

Pritchard issued a warning that the cost of living crisis will lead to criminals trying to exploit people even more, through crimes such as loan fee fraud and authorised push payment (APP) scams.

“Financial crime is a bit like COVID,” said Pritchard. “Like the virus, which mutates to evade destruction, criminals seeking to cash out and carry out financial crime are ever-changing – they will adapt to exploit new weaknesses in the financial system and will constantly vary their tactics when targeting the vulnerable for fraud.”

Pritchard suggested the FCA must "respond systemically” to the rise in fraud, in order to limit and defeat it. She added that the regulator is now “unleashing tools more rapidly”, as well as driving improvements in firms’ controls and issuing warnings where it sees harm, flagging names on warnings list more quickly, and firing its “Scamsmart” campaigns.

“We are sharing more of what we are seeing – examples of good controls and bad controls – so that everyone can learn and improve their response,” Pritchard said.

“We shared findings from our recent review of challenger banks widely, as the risks there are no different than in the whole retail sector. We found system weaknesses that could be exploited – weak customer due diligence and insufficient rigour in dealing with transaction alerts.

“These are important – if you don’t know your customer, how can you know what to expect and what is unusual? And if you don’t review how alerts are dealt with, how can you know that your alerting system is calibrated well, or is acting the way it should?”

In response to the FCA warning, head of retirement policy at AJ Bell, Tom Selby, commented: “It is a depressing fact that the more vulnerable people become, the more active financial fraudsters are. We saw this during the worst of the COVID pandemic, and with inflation surging we are seeing it again during the cost of living crisis.

“Scammers often use sophisticated techniques to swindle people out of their savings, with cryptocurrency ‘investments’ offering huge potential returns increasingly used to tempt people to part with their cash.

“These investments often end up being a Ponzi Scheme, or entirely fictitious, with those who hand over their money risking losing everything.

“While people of all ages can fall victim to scammers, those who are able to access their retirement pot – potentially the biggest asset they own – will inevitably be a prime target. Huge efforts continue to be made to protect people from thieves, but ultimately the surest way to avoid becoming a scam victim is to know the tricks they use and not hand over your money in the first place.”

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