The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

Growing steadily in the UK, the effect of this fraud is felt not only in the hearts and pockets of the victims, but within the finance institutions these individuals rely on. In 2022 alone, victims lost over £68 million to these scams, with an average loss of nearly £10,000 per person. 

New regulations are coming into play that will affect how banks respond to romance scams. According to the Payment Systems Regulator (PSR)’s new mandate, from October 2024, reimbursements for authorised push payment (APP) fraud will be obligatory. This makes the implementation of robust safeguards critical for financial institutions.  

The mechanics of romance fraud 

What begins as a seemingly innocent online connection request may hide much darker intentions. Fraudsters create multiple accounts, establish trust with their targets, and fabricate stories of financial distress to solicit money. Once they achieve their goals, they sell the victims' data to the highest bidder. 

According to the BBC, romance scams have increased by 58% since 2019. While 8,000 victims reported their cases, experts believe the actual number is much higher, as many stay silent out of embarrassment. Individuals aged 40 to 60 are most at risk, but younger generations are also targeted through dating apps. 

Strategies for financial institutions 

Financial institutions are key to fighting romance fraud. Here are several strategies to adopt: 

Invest in advanced fraud detection systems that use machine learning and artificial intelligence to identify unusual transaction patterns indicative of fraud. These systems can flag suspicious activities, such as large transfers to foreign accounts or rapid successive transactions. 

Education is a powerful tool in preventing romance fraud. Regular awareness campaigns can inform customers about online scams and fraudsters' tactics. This can be done through emails, SMS alerts, and social media posts. Collaborating with online dating and social media platforms to deliver education and messaging can also demonstrate a united front against fraudsters. 

Implement real-time transaction monitoring to promptly detect and halt suspicious transactions. Tools that analyse transaction patterns and data points, such as telecom insights, can identify the risk and likelihood of potential fraud. 

Work closely with law enforcement agencies and organizations like Action Fraud to share information and resources. Sharing data with technology providers can enhance machine learning models to identify fraudulent activities more accurately. Known scam-related data signals, like phone numbers or email addresses, can be used to detect future fraudulent activities. 

Offering dedicated support services for victims can help mitigate the emotional and financial impact. It can also prevent your customers from becoming repeat victims. 

Conclusion 

Romance fraud scams exploit individuals seeking genuine connections online, leading to substantial financial and emotional damage. This underscores the need for proactive measures. Financial institutions play a critical role in helping to defend customers from fraud attacks. By enhancing fraud detection systems, educating consumers, leveraging technology and collaborating across industries, banks can significantly reduce the incidence of romance fraud, making the online world safer for both the heart and the wallet.