Jeff Salway: ‘Vishing’ scams cast far and wide

While fishermen try to lure a salmon to bite, vishing scammers use even more sophisticated methods to ensnare unwary consumers. Picture: Donald MacLeod

Consumers are getting too little protection against the growing army of fraudsters seeking to fleece them of their life savings, experts say as new threats emerge.

Reports of pension scams have risen sharply since new rules took effect in April making it easier for people to access their pension pots from the age of 55.

Citizens Advice warned last month that over 55s are at growing risk of being targeted by fraudsters pushing investment scams. It said two in five of its staff had seen people “targeted repeatedly” by scammers, with many falling victim to them as fraudsters employ a widening array of tricks to get their hands on pension cash.

Victims are often experienced and even sophisticated older investors who have been persuaded to plough large sums of money into “exotic” investment “opportunities”, the Financial Conduct Authority (FCA) this week told the Commons work and pensions select committee.

Pension savers are increasingly at risk of losing large sums of money to “number spoofing” or “vishing” scams.

This is a phone-based con which occurs where fraudsters use technology to mimic the telephone number of the organisation they are impersonating, making it appear on the victim’s caller ID.

The caller claims to represent a bank, pension provider or the police and persuades the victim that their account is at risk. They then urge the the victim to quickly transfer a sum of money to an apparently safe bank account, which invariably is anything but.

One form of vishing is the “no hang-up” scam, where the target is encouraged to phone back using the number they have for the firm (such as that on the back of a bank card), but the caller keeps the phone line open to ensure that the call goes straight back to them.

Fraudsters made £24 million last year from vishing scams, Financial Fraud Action UK (FFAUK) has reported. A fifth of people who have complained to the Financial Ombudsman Service (FOS) about vishing had lost between £20,000 and £49,999, but many had lost even more.

The FOS explained that, because banks have a duty to act on customer instructions, they can rarely be held responsible for losses. That means very few people scammed by vishing ever see their money again. However there have been complaints about a lack of consistency in the way some banks deal with large transactions, and with their handling of cases where people have lost money.

Pressure is now growing on UK banks to do more to tackle the problem, which is viewed by many experts as an unauthorised payments issue and therefore in the industry’s jurisdiction.

The British Bankers’ Association (BBA) said it had launched campaigns warning consumers of risks, including awareness raising efforts in conjunction with FFAUK.

“We’ve launched our Know Fraud, No Fraud campaign to raise awareness of these sinister methods,” a BBA spokesman told The Scotsman. “The more people know, the less likely they are to become a victim. For instance, a bank would never ask you to transfer funds into a so-called ‘safe account’, even if there has been a security breach.”

But raising awareness isn’t enough, said Graeme Mitchell, director of Lowland Financial Planning, especially when it comes to pension scams.

He called for a register of legitimate pension providers that could be checked by individuals and by any firm being asked to transfer benefits

“If a company is not on the list, providers could then contact the client to let them know and double-check everything. Better to risk a slight delay in processing the request but catch more dodgy requests as a result.”

The current focus on raising awareness places too much of the onus on individuals, said Rachel Vahey, an Edinburgh-based independent pensions consultant.

“I would like government to consider if there is anything further it can do to tighten the legislation around who can call or contact potential clients and what they can say,” she said. “I appreciate this can be tricky to pull off, but I believe we should be making it more difficult for scammers to contact potential clients.”

She believes clearer signals could be sent to unscrupulous firms outlining that there will be consequences to their actions.

“At the moment, it feels like the government and regulators are merely relying on people being able to say ‘no’ to some very convincing arguments, rather than trying to stop those making those arguments and persuasions,” said Vahey.

• For more information - www.financialfraudaction.org.uk/