The vast majority of UK businesses who fall victim to fraud are eligible to reclaim lost funds through their banks- but few firms are aware of the opportunity, according to a fraud recovery law firm.
Since October 7, last year, banks are obliged to pay back any ‘microenterprises’ that may have lost money to fraud though Authorised Push Payments or CHAPS payments.
But National Fraud Helpline solicitors, a trading name of Richardson Hartley Law, says very few businesses are aware of the new mandatory reimbursement scheme which requires payment service providers (PSPs), including banks, to pay back up to £85,000 of money lost through scams.
The scheme introduced by the Payments Systems Regulator (PSR), which also helps consumers recover fraud money, means PSPs must pay back the money unless they can prove a business was ‘grossly negligent’.
Microenterprises are defined as businesses which employ fewer than 10 people and whose annual turnover and annual balance sheet total does not exceed the equivalent of €2 million. Charities with an annual income of less than £1 million are also eligible for the reimbursement scheme.
Martin Richardson, a senior partner at National Fraud Helpline solicitors, said: ‘This mandatory reimbursement scheme for fraud victims covers 90% of the UK’s 2.7m businesses but very few are aware of it.
‘Although the PSR scheme only covers up to £85,000 of lost funds, the Financial Ombudsman Service can order banks to pay up to £430,000. Average losses for businesses are estimated to be £11,400 so that’s well within the PSR’s £85,000 reimbursement threshold.
‘It’s generally accepted that business fraud is hugely underreported. This is thought to be because of reputational risk, a concern it will increase insurance premiums and a worry that the business will be perceived as having poor compliance systems in place.
‘Under the scheme banks are obliged to highlight the fact that this scheme exist and we feel they should be doing much more to make businesses aware of the fact that they if they fall victim to fraud then there is help.’
The most recent data from UK Finance reported 7,735 businesses had reported APP fraud in 2023, an increase of 15% on the previous year. The PSR said that it expected the true figure of businesses being scammed was significantly higher.
Under the new regulations banks should reimburse businesses that have a valid fraud claim within five working days.
Mr Richardson added: ‘We’re trying to get the message out there that there is help for businesses that fall victim to scams and that you should report it. We even have a reputational risk expert to help navigate any concerns a business may have.
‘It doesn’t matter what your business is, all UK companies are vulnerable to scams, particularly as the fraudsters become more ever more sophisticated and take advantage of technological advances.’