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'Police investigated my £66,000 fraud loss and told me Nationwide's procedures were substandard'

Amelia Murray
Cally Ellison and her business partner Julia Lee were developing a London property when they were tricked by a bogus builder - © Eddie Mulholland

Bank transfer fraud has been one of the most talked about financial issues this year.

Yet victims, such as reader Cally Ellison continue to lose life-changing sums because of weaknesses in the banking system.

Ms Ellison, 61, was developing a property in east London, with her business partner Julia Lee, when she received what looked like a genuine email from her building firm.

It requested a payment into an alternative Nationwide account because it claimed its bank was in the process of completing its “end-of-year account reconciliation”.

Ms Ellison, who lives in London, made two separate transactions, one for £50,000 on Sept 14 last year, and another for £25,478 the next day. Days later the building company contacted Ms Ellison to say it had not been paid.

She immediately called her bank Barclays to report the scam. Just over £9,000 was recovered but more than £66,000 had already been transferred out of the Nationwide account.

How can non-customers report fraudulent accounts?

Ms Ellison contacted Nationwide, the Metropolitan Police and the Mayor’s Office for Policing and Crime headed by Sadiq Khan.

Three months later she received a call from Edmonton police force. Ms Ellison said an officer explained that the details of her case had “filtered down” from the Mayor’s office and would be passed to police in Scotland because one of the fraudster’s transactions had taken place in Aberdeen.

It was during this investigation that Ms Ellison said she was told by the police that Nationwide’s “know your customer” checks – supposed to be conducted when an account is opened – were “substandard”.

She said the police “weren’t happy” and reported Nationwide to the regulator, the Financial Conduct Authority. Despite the allegation Nationwide refused to reimburse Ms Ellison the stolen funds.

The building society also refused to refund £8,700 to another scam victim, Balazs Kelemen, last month, despite damning police evidence that revealed that it had allowed a fraudster to open an account with a false Romanian ID card and a counterfeit British Gas utility bill.

The mutual insisted it made “required and reasonable” checks and was satisfied the paperwork appeared to be genuine. It denied negligence.

Arun Chauhan, director of Tenet Compliance & Litigation, a law firm providing advice on financial crime compliance, suggested that staff were not being trained well enough to identify ID documents and there was a lack of consistency across the industry when it came to account opening procedures.

Mr Chauhan said banks needed to tighten up their checks by asking for a greater number of documents or more time to gain “independent verification” before approving an application for an account.

He said that if the banks’ checks failed, there should be a compensation scheme operated by the FCA which would be contributed to by all banks.

Nationwide said it “sympathised” with Ms Ellison, but denied an error had been made. 

It said that the account was opened in accordance with the “legal and regulatory standards in place at the time”.

Police Scotland said enquiries had concluded and the victim had been offered “appropriate advice”.

Ms Ellison said the police told her Nationwide's KYC checks were 'substandard' Credit: Eddie Mulholland

Telegraph Money has waged a campaign to force those banks that provide services to criminals – the recipient banks, in cases of transfer scams – to take greater responsibility for their role in these crimes. And while there is much further to go, we have celebrated a number of successes with readers’ losses being recouped.

Patterns have emerged in the cases we have brought to light that suggest consistent weaknesses in some banks’ processes. Banks are required to carry out “customer due diligence” measures, for example, as part of their anti-money laundering procedures.

But in numerous cases reported by Telegraph Money, banks are still accepting fake IDs and other false documents as sufficient proof to open and operate accounts. Nor do banks operate consistent screens to detect questionable payments.

Transfer fraud data was collated and published for the first time in November this year by UK Finance, the industry body, which revealed that these scams are now the second biggest type of payment fraud after card fraud. 

More than £100m was lost to these types of scam in the first half of this year in nearly 20,000 cases. Just £25m was recovered. Consumers lost an average of £3,000 and businesses £21,500.

The Payments Systems Regulator is considering a “reimbursement model”, among a number of other remedies, which if introduced would apply from September 2018.