Banks must improve their ‘creaky’ fraud protection systems, says Vince Cable
- The former business secretary said lenders should compensate fraud hit firms
- Cable urged the House of Commons Treasury Committee to make recommendations to the Government
- He added: ‘These are the big-data demands that society is rightly placing on corporations, and banks should not be exempt from that’
Banks must improve their ‘creaky’ fraud protection systems and properly compensate small businesses conned out of their money, says Vince Cable.
The former business secretary, seen as the ‘scourge of the banks’ during the financial crisis, said lenders should compensate firms hit by fraud.
Britain’s major banks have a voluntary code which requires them to compensate individual victims, as long as the person has taken reasonable precautions to protect themselves against fraud.
Banks must improve their ‘creaky’ fraud protection systems and properly compensate small businesses conned out of their money, says Vince Cable
This is designed to encourage banks to improve their own fraud protections but they are not obliged to compensate customers who are conned – even though the sums lost are typically much larger.
Cable says banks should widen the compensation net. He said: ‘Banks urgently need to update their creaky anti-money-laundering (AML) technology. Because the compensation they pay to fraud victims is limited, they are not properly incentivised to invest in this tech, which means that fraud is increasing as tech-savvy fraudsters get further ahead.
‘Banks should face a legal requirement to pay compensation whenever failures in their AML controls cause losses.’
Cable urged the House of Commons Treasury Committee to make recommendations to the Government. He added: ‘These are the big-data demands that society is rightly placing on corporations, and banks should not be exempt from that.’
Tory MP Kevin Hollinrake, cochair of the parliamentary group on fair business banking, said: ‘Banks want businesses to make payments online, because that brings their costs down, but they’re not training people, which means checks and balances are lost.’
Industry body UK Finance said: ‘The industry is tackling fraud on every front, investing millions in technology to protect customers and working closely with law enforcement to stop the criminal gangs responsible and neutralise the threat.’