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Money Mail readers have come forward in droves to tell of heartbreaking losses to the cruel new ‘mum and dad’ scam.

Last week we reported how parents were being bombarded with text messages from criminals posing as their children and pleading for money.

We have since been inundated with emails from readers who have lost up to £10,000 after being duped into believing their loved one was in financial trouble.

Conned: Jackie Taylor and husband James paid out almost £2,000 to a fraudster purporting to be her son who had lost his phone

Conned: Jackie Taylor and husband James paid out almost £2,000 to a fraudster purporting to be her son who had lost his phone

Your tales have also revealed how major banks are wriggling out of paying refunds, and how top-up card accounts are now becoming the favoured tools of fraudsters.

Using information from readers about the scam accounts, we have compiled a dossier of evidence and sent it to the police, the financial regulator and major banks for investigation.

In the new ‘mum and dad’ con, scammers pretend to the parent that their child has lost their phone and is using a new number. 

The reasons the fraudsters give for needing money are also often highly sensitive — such as for an embarrassing medical issue that needs urgent, private treatment.

Parents’ pain

For Elaine Hodges, 71, there was nothing strange about receiving a WhatsApp message from her son as he ‘never rings and only ever texts’.

So when he told her he had broken his phone and this was his new number, she dutifully saved it and engaged in chit-chat.

But the person texting her was not her son but a fraudster who conned the loving mother out of more than £2,200 to pay off an urgent home repair bill.

Elaine, a retired HR worker from Camberley, Surrey, says: ‘I was gutted when I realised I had been scammed. It was a real shock.’

Her bank, Halifax, has refused to refund her. A spokesman said she did not check the number that had contacted her and ignored warnings before making the payment.

Mitchell Ward lost more than £8,000 to a scammer he believed was his 24-year-old son. The messaging started with a simple ‘Hi dad’. As he only had one child, Mitchell didn’t ask the fraudster to confirm his name and instead saved the new number.

Before long, he was being asked to pay thousands of pounds for a private medical operation his ‘son’ claimed to have undergone.

For Mitchell, 53, from Leicestershire, many of the details of the messages rang true as his son had recently lost a bank card on a night out and he had also recently undergone a medical procedure.

After making several transactions, he only realised it was a scam when Santander blocked the final instalment. He says: ‘You would do anything to help your family. Scammers prey on that.’

Santander initially refused to refund Mitchell the money, but now says it will review the case.

Fraudsters can use cruel tricks to make their lies believable.

When other victims asked which of their children they were speaking to, crooks often replied ‘guess who?’ or ‘your eldest’ if they did not know their name. 

And when parents asked to speak to their son or daughter, the conmen claimed they could only text as the microphone on their mobile was broken.

Accountant Jackie Taylor, 63, was last week tricked out of £1,830 by a fraudster purporting to be her son who had lost his phone.

Jackie, from Hampshire, says: ‘You only pay out because it’s your flesh and blood and you’re worried about them. You wouldn’t do it for anybody else.’

Luckily her bank, Lloyds, agreed to refund her.

Tactics: When some victims asked which of their children they were speaking to, crooks often replied ‘guess who?’ or ‘your eldest’ if they did not know their name

Tactics: When some victims asked which of their children they were speaking to, crooks often replied ‘guess who?’ or ‘your eldest’ if they did not know their name

Card tricks

Money Mail compiled the details of 32 scam accounts where victims had been asked to send money. Of these, 14 belonged to a firm called Prepaid Financial Services and a further 12 to Prepay Technologies.

The companies provide easy-to-use cards which can be loaded with money and then used in stores and at ATMs. But they are used almost exclusively by businesses, who then dish them out to their customers.

For instance, energy companies may send the cards to customers who need to top up their gas and electricity meters. Households receiving benefits are also often given prepaid cards by governments and councils.

A Prepaid Financial Services spokesman told Money Mail its cards are issued to a wide range of clients ranging from travel firms to governments.

Experts say the accounts are popular with scammers because they offer minimal traceability and do not have as many safety checks in place as high street banks.

And while most financial services are signed up to the fraud prevention membership organisation Cifas, Prepay Technologies and Prepaid Financial Services are not. 

This means they do not share their fraud intelligence with the other major banks and financial bodies in the not-for-profit network.

So how have scammers managed to sign up for these accounts? We put this question to Prepaid Financial Services, which has since been taken over by Australian firm EML.

A spokesman says it sells only to businesses, adding ‘we apply an identity verification solution that delivers protection to our customers and us’. This includes facial recognition technology.

When Money Mail attempted to sign up for a card, a customer service representative said new applications were currently on hold.

Fraud expert Jack Buster, of ActionScam, says: ‘It is far too easy to open up a bank account with no credible checks in place.’

He says that digital services have become a favourite with scammers because they do not use the Confirmation of Payee (CoP) system.

This was introduced in 2020 and it acts as a name-checking service when transferring money between accounts. It means customers are alerted if the name and account details do not match. 

But there is no obligation for smaller banks to implement the system. The ‘mum and dad’ con has exploded at a record rate — with all major banks saying customers are increasingly falling victim.

Refund lottery

Some readers told Money Mail their bank had helped prevent them losing thousands to a scam after blocking their payments.

But others are furious their bank had allowed multiple unusual payments to go through without so much as a phone call.

Some victims report being refunded quickly, while others have been flat-out refused.

We found banks trying to wriggle out of refunds by claiming the victim should have called to check their ‘child’ was who they claimed to be. 

But Charlie Shakeshaft, of the fraud-fighting body Individual Protection Solutions, says: ‘Banks offer stop warnings before transactions. 

But with a sophisticated and highly emotive scam like this, the victim believes they are trusting a family member so these warnings become meaningless to them.’

An EML spokesman says: ‘We cannot discuss the operations of our specialist anti-fraud investigators (who work directly with law enforcement) or our anti-Fraud/AML [anti-money laundering] procedures with any outside party for confidentiality and security reasons and so as not to prejudice any cases of alleged fraud, which may exist in the court system. 

‘I can advise that a stringent complaints process is supported by the relevant regulatory bodies, which we fully adhere to and notify third parties as necessary.’

A spokesman for Action Fraud says: ‘We work with the banking industry to clamp down on accounts used for fraud and share information with them where possible. We also have an initiative that alerts banks to accounts used in fraud and nearly 7,000 alerts have been sent so far this financial year, with the aim of getting funds lost returned to victims involved.’

A Financial Conduct Authority spokesman says: ‘If people suspect, or fall victim to, payment fraud, we urge them to report this to their bank and Action Fraud. Scams can also be reported on the FCA website.’

h.kelly@dailymail.co.uk

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Emma Spencer was a victim of a sophisticated APP fraud, and lost thousands

Emma Spencer was a victim of a sophisticated APP fraud, and lost thousands

A young woman has lost thousands of pounds after falling victim to a sophisticated delivery text scam.

Emma Spencer, 31, fell foul of an Authorised Push Payment (APP) scam after receiving a text at the start of December, supposedly from Royal Mail, claiming a parcel couldn’t be delivered unless she paid £2.

This has become a favourite tactic of fraudsters over the past year, as more people work from home and are ordering parcels to be delivered. 

Concerned about the supposedly missed delivery, Emma filled in her bank details to make the £2 payment. 

The first sign of trouble came two days later when Emma received a text from her bank, Lloyds, asking for a confirmation code for a £2,300 transaction that had been attempted on Harvey Nichols’ website using her details. 

Emma, who is from London, knew she had not made the transaction – and never shopped at Harvey Nichols – so she rightly withheld the code.

Within minutes she received a phone call from someone who identified themselves as a ‘fraud investigator’ from Lloyds, who said he was going to help her protect her account.

He asked her about several transactions and she confirmed whether she had made them or not. 

Believing this was genuinely a representative of Lloyds, Emma was persuaded to transfer all of the funds in her ISA and bank account, all of her life savings, to a supposedly ‘safer’ account.  

She was told to move her money in amounts of £1,400 from her Lloyds account to her Revolut online banking account, totalling £9,190. 

Moving money between several accounts in a short space of time can make it more difficult for banks to track and recover it.  

After that, she was told to set up another beneficiary, the scammer, which she did before transferring all of the funds over to them.  

To add insult to injury, Emma was also scammed into taking out a £14,000 loan as, when the scammer called, they said someone had attempted to take out a loan in her name.

They pretended to go through an online process with her and she was told Lloyds would be able to cancel it from her end.

 It sounds so silly now, but they had ground me down for an hour, plus they had asked me security questions so I assumed they were legit

It wasn’t cancelled, though, and the money went into her Lloyds account straight away. 

After this, Emma, who was panicked and worried, called her mother who advised her she thought this was a scam and to stop sending money over and to ring Lloyds straight away. 

Emma said: ‘It sounds so silly now when I say it but obviously they had ground me down for an hour, plus they had asked me security questions so I assumed they were legit.’ 

She phoned Lloyds immediately, only to discover that it was too late and all her money was gone.

With the loan, although she had hold of this money, she presumed the scam artists would have asked her to move all that money to Revolut as well.

Getting the loan cancelled became another source of concern. Emma spoke to seven different people at Lloyds, a number of which told her that she would have to pay the loan off plus interest because she took it out herself.

This was despite the fact she was previously advised by a representative that the bank had applied for the loan to be taken off her account.

A Lloyds and Revolut customer fell victim to a sophisticated Authorised Push Payment scam

A Lloyds and Revolut customer fell victim to a sophisticated Authorised Push Payment scam

After various phone conversations with Lloyds fraud department in which she desperately trying to reclaim the £9,190, Emma was told a scam artist accessed her bank account using Lloyds automated phone banking.

They found out what transactions she had made, which is how they knew what to ask her on the phone, and were then able to move the money from her account to their own. 

A large amount of money had also been transferred from her ISA to her current account which almost exactly matched the amount the scammers asked Emma to transfer.

However, her account was not blocked and no one from Lloyds made further contact when she withheld the security code.

When she asked how this could happen, Lloyds said the fraudster probably used the details from the phishing email that she had filled in previously.

She asked why they hadn’t needed a password or code, and Lloyds said this was not needed for automated banking.

This shocked Emma who thought there would be security measures to prevent anyone other than the bank account holder from gaining access to the account.

Lloyds told her it did see the £1,400 payments going from her personal account to her Revolut, but didn’t contact her because both accounts are in her name and it was ‘open banking’.

However, the fraud department told her it was a regular occurrence for scammers to ask victims to move money from personal accounts to their Revolut account and that it happens a lot in scamming cases.

What is an APP scam? 

Authorished push payment (APP) scams involve the fraudster tricking their victims into willingly making large bank transfers to them, according to the credit agency Experian.

For example, they may pose as someone from a bank, or another trusted organisation, before claiming the customer has been a victim of fraud and telling them to move money to a different bank account. 

Often there is a demand to act quickly, giving the customer less time to think about what they are being asked to do. 

To help avoid this type of scam, consumers are urged to question, to the highest level, if anyone asks them to divert a payment or move their savings.

Make sure you phone the bank or firm directly and check on any changes to payment details. Don’t rely on emails as these could be intercepted.

Never rush a payment, as a genuine organisation won’t mind waiting.

Delivery scam texts claiming to be from Royal Mail and other delivery providers have increased recently, as people have become more reliant on online shopping during the pandemic

Delivery scam texts claiming to be from Royal Mail and other delivery providers have increased recently, as people have become more reliant on online shopping during the pandemic 

Lloyds also advised Emma it had been trying to get in touch with her, although she said she had no missed calls or emails.

Emma said: ‘Interestingly, on all the calls I made to the bank, not once have they asked me for letters of my password or memorable information, only my date of birth and address, which the fraudster had.’

Whilst eventually the loan was cancelled, Lloyds said it could not help her recover the £9,190 she sent the fraudsters as she had transferred the money ‘willingly’.

Although Emma accepts she handed over the money, she sys it happened under duress. She believes Lloyds did not act to protect her account despite the fact they saw signs of unusual activity.

Emma said: ‘What is most upsetting is that when I speak to people at Lloyds, I am made to feel like this is all my fault as I physically transferred money and took out the loan.

‘But I believed the fraudster to be a fraud manager from Lloyds, having been asked a number of security questions. He also knew the contents of my account, my recent transactions and that I had an Isa.

‘What confuses me is that both [Lloyds and Revolut] have told me these scams happen, yet seem to do nothing to change the processes that allow them to happen.’

Revolut, too, transferred the whole amount to one of their own customer’s accounts seemingly without any investigation into who the money was going to despite being signed up to a ‘confirmation of payee’ system.

The only interaction Emma received was a text message to confirm a new payee.

Understandably, Emma has been left distraught by the incident, having lost her confidence and her life savings after the incident.

To add to the misery, it seems unlikely she will see any of her money again.  

This is Money spoke to both Lloyds and Revolut to find out what security measures were – and weren’t – put in place and how this sort of scam can get through their systems. 

Lloyds said it was important to remember that your bank will never contact you to ask you to move your money to another account - but fraudsters can be very convincing

Lloyds said it was important to remember that your bank will never contact you to ask you to move your money to another account – but fraudsters can be very convincing

Lloyds response: ‘We repaid the loan but the cash fraud didn’t happen on our watch’ 

A Lloyds Bank spokesperson said: ‘Helping keep our customers’ money safe is our priority and we have a great deal of sympathy for Ms Spencer as the victim of a scam.

‘Our investigation found that she transferred money from her Lloyds Bank account to her own existing account at Revolut, from where she went on to make payments to an account controlled by fraudsters. No money was transferred to fraudsters from her Lloyds Bank account.

‘It is important to remember that your bank will never contact you to ask you to move your money to another account – this is a tell-tale sign of a fraudster at work.’

Lloyds said its investigation found that Emma provided the fraudster with enough secure information – which should be known only to the customer – to allow them to make a number of internal transfers from her Lloyds Bank savings account to her Lloyds Bank current account via its automated telephone banking service.

It said it is important to note that only a limited range of actions can be carried out on an account via this service.

The fraudster would not have been able to withdraw these funds or transfer money to a new beneficiary, it said. 

As these were internal transfers between her own existing accounts within Lloyds Bank, no money was lost.

Customers are urged to never transfer money to an unknown bank account [stock image]

Customers are urged to never transfer money to an unknown bank account [stock image]

Unfortunately the fraudster convinced Emma that she needed to transfer her money out of her Lloyds Bank accounts, to so-called safe accounts held at other banks, which it says no bank would ever ask a customer to do.  

Lloyds said Emma initially transferred the money to her own account at Revolut. As she was transferring these amounts to another account in her own name, these transactions were not flagged as being suspicious. 

She then went on to transfer money from her Revolut account directly to the fraudster’s account. 

The loan has now been unwound and her credit file updated to reflect this. It confirmed Emma’s current account has a credit balance in addition to an unused overdraft limit, and she continues to use her debit card to make payments.

Lloyds did not answer our question regarding why a customer transferring over £9,000 out in the course of an hour, when her usual outgoings for a month stand at around £2,000, why it was not flagged on its system. 

Revolut’s response: ‘We tried to recover money but it was transferred to a third party’ 

Revolut said that, when it detects or is alerted to fraudulent behaviour, it gathers the necessary information from the customer and initiates its APP Fraud Recovery process.

This, it said, includes assessing any customer testimony and auditing the entire ‘transaction journey’. 

It checks of all the warnings of potential fraud that the customer received, as well as contacting external parties that might have been in receipt of fraudulently-obtained funds.

Where apparently fraudulently obtained funds have been transferred to another account, Revolut said it would immediately try to intercept them and prevent any loss to the customer.

But the ability to do so depends on whether the funds have subsequently been transferred out of the external party’s account.

A Revolut spokesperson said: ‘This matter was reported two hours after the customer transferred the funds. 

‘We immediately activated our anti-fraud procedures, including immediate contact with the external party to which the funds had subsequently been transferred.

‘All of this was completed within 20 minutes of being reported by the customer.

‘Where apparently fraudulently obtained funds have been transferred to another account we immediately try to intercept any funds and prevent any loss to the customer.

Revolut said when it detects or is alerted to fraudulent behaviour, it gathers the necessary information from the customer and initiate its APP Fraud Recovery process

Revolut said when it detects or is alerted to fraudulent behaviour, it gathers the necessary information from the customer and initiate its APP Fraud Recovery process

‘Unfortunately such funds are often transferred to a non-Revolut account immediately so that we may not be able to recover funds. We always make every effort to do so – working with other financial services companies and banks as necessary.

‘Unfortunately, to date the funds have not been recoverable. The ability to recover the funds once they have been transferred externally depends largely on whether the funds have subsequently been transferred out of the external party’s account.’

Revolut is not currently a member of the Contingent Reimbursement Model Code, which sets out consumer protection standards in relation to APP scams and refunds. 

How can customers get their money back from scams? 

As it stands, Emma is unlikely to see her life savings again despite falling victim to a sophisticated scam.

She assumed should anything like this happen to her, she would be warned by her bank, and feels there were not enough security measures in place.

Unfortunately, she is just one of thousands of people who fall victim to such fraudsters everyday. 

Whilst some are fortunate and get their funds back, many will never see their money again as fraudsters quickly remove the funds from their accounts to avoid detection. 

If this has happened to you, it is essential to contact your bank immediately to alert them of the fraud. They can then stop any more transactions going through and see if they can scrape back any available funds.

It could also be worth contacting the Financial Ombudsman as they do investigate a variety of scams including APP fraud. 

Meanwhile, Action Fraud suggests consumers follow the below tips before sending money to anyone:

Stop: Taking a moment to stop and think before parting with your money or information could keep you safe.

Challenge: Could it be fake? It’s ok to reject, refuse or ignore any requests. Only criminals will try to rush or panic you.

Protect: Contact your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Few parents would be suspicious of a text message from their son or daughter saying they had broken their phone and was using a temporary number. Especially, perhaps, if it was signed with their name, kisses and even a love heart emoji.

But many families have found the seemingly innocent message is, in fact, the start of a cynical scam that can leave them thousands of pounds out of pocket.

Known as the ‘mum and dad’ or ‘friend in need’ con, fraudsters impersonate their victims’ loved ones via the text messaging service WhatsApp.

Ex-headmistress Elizabeth Baker - who lives with retired church minister Hugh (pictured) - came close to losing more than £500 after a scammer pretended to be her daughter

Ex-headmistress Elizabeth Baker – who lives with retired church minister Hugh (pictured) – came close to losing more than £500 after a scammer pretended to be her daughter 

They claim to be in distress and in urgent need of cash in the hope worried relatives will hand over money without thinking twice.

Santander reported a 532 per cent surge in the new scam between August and November last year.

Nearly two-thirds of the crooks were impersonating someone’s son, while 33 per cent pretended to be their daughter.

Data from Action Fraud reveals victims lost nearly £50,000 between August and October last year; some victims are out of pocket by up to £3,000 each, says the fraud reporting body.

One family, which wishes to remain anonymous, was tricked out of £1,500.

Scammers contacted the father posing as his daughter, claiming she had visited a private clinic for emergency medical treatment and that a doctor was pestering her to settle the bill.

Over the course of two days, the fraudsters sent a total of 56 messages asking for help, until her worried father asked her grandparents to send the money.

It was only when the family finally reached her on the phone the following day that they realised he had been duped.

A conman tricked Cally Beaton's father out of £1,800

A conman tricked Cally Beaton’s father out of £1,800

The grandfather, 75, says: ‘My granddaughter has a very unusual spelling of her name. So when the text came up, we didn’t think for a second it could be anybody else.

‘My son rang me in a panic saying she desperately needed the money, so we said we’d make the transfer.

‘Once you realise it’s a scam, you feel like a fool. It’s horrible.’

His bank has since refunded the money.

Elizabeth Baker, 70, came close to losing more than £500 after a scammer pretended to be her daughter Katrina. 

The grandmother-of-three was on holiday in Eastbourne when she received a WhatsApp message.

‘Hi Mum, I dropped my phone down the toilet, so I can’t use it anymore,’ it read.

At first the retired prep school head advised her to pop her phone into a box of rice to dry it out, but then the scammer began asking her for cash.

Elizabeth says: ‘The message said it was for an urgent bill which needed to be paid by tomorrow and sent me the bank details to transfer the money.’ 

She became suspicious and rang Katrina’s partner, who confirmed that her daughter’s phone was fine.

Elizabeth, who lives with retired church minister Hugh, in Tamworth, Staffordshire, says: ‘Those messages could easily have come from my daughter. It just shows how all of us are vulnerable to these scams.’

That vulnerability, heightened by the pandemic, almost caught out Cally Beaton’s father: he nearly lost £1,800 to a WhatsApp scammer pretending to be one of his children

The retired teacher, who did not want to be named, received a message addressing him as ‘Dad’ last week. The sender claimed they were contacting him from a new number after breaking their old phone.

Cally, 52, says: ‘They signed the message off with an ‘x’ and my father assumed it was my brother. It was so sad, because he was really pleased to hear from my brother and was asking how he was.’

The scammer then told her dad they had not checked their email for a while and needed to borrow £1,800 to pay a bill.

However, when Cally’s father tried to transfer the money through his online account, the bank halted the payment and requested a call to authorise it.

Luckily, the pensioner went on to call Cally before he did anything else, and she told her father it was a scam. Cally, a comedian from Camden, North London, says: ‘I was furious to think that people would exploit parents who just wanted to talk to their children during the pandemic.’

Money Mail also spoke to a woman, 66, who paid £814 to a scammer posing as her son. She says he had been struggling financially due to the pandemic — which made the requests for money all the more believable.

In text messages, the scammer begged: ‘I need to pay the bills now otherwise the amount will be increased,’ and ‘Oh no I can’t wait.’

Known as the 'friend in need' con, fraudsters impersonate their victims' loved ones via the text messaging service WhatsApp

Known as the ‘friend in need’ con, fraudsters impersonate their victims’ loved ones via the text messaging service WhatsApp

When she later queried with her bank where the payment had gone, she was told it had been paid into an account with Prepaid Financial Services (owned by Australian fintech firm EML Payments).

The firm’s Trustpilot review webpage is littered with complaints that the service is linked to sort codes given out by WhatsApp scammers. 

One reads: ‘I was scammed by a WhatsApp message starting ‘hi mum’ as the other reviews. I was at work at the time and unfortunately fell for it, losing £945 into two accounts with this bank’s sort code.’

In September 2019, the firm was fined €1 million by the French banking regulator for lapses in its anti-money laundering controls, including failures to report suspicious card activity to the authorities. 

And in May last year, the Central Bank of Ireland launched an investigation into compliance issues at the firm that has now

been rebranded as EML Cardholder Portal. Although the firm itself was not being accused of fraud, as the conduit company, it was accused of not making sufficient checks on where the money was going.

The Central Bank of Ireland has since given EML’s Irish subsidiary the green light to sign up new customers and launch new programmes.’

Fraud reports have rocketed over the past two years, with crooks exploiting the pandemic to prey on vulnerable households.

Victims lost £4 million a day in the first six months of 2021, a 30 pc increase in losses compared to the same period in 2020. Many were targeted by criminals impersonating trusted organisations such as Royal Mail and HMRC.

And this latest trick reveals just how sophisticated fraudsters have become.

Nearly two-thirds of the crooks were impersonating someone's son, while 33% pretended to be their daughter

Nearly two-thirds of the crooks were impersonating someone’s son, while 33% pretended to be their daughter

Fraud experts at Individual Protection Solutions (IPS) believe victims’ personal details are sold and bought by scammers online.

The firm estimates that 71 per cent of Britons have had details from at least one of their online accounts leaked on the dark web.

Charlie Shakeshaft, founder of IPS, advises: ‘This scam is becoming more and more widespread because it works. 

If you feel rushed by a sender, this is a tell-tale sign it is a scam. Take your time, and make sure you hear from the family member or friend directly using another channel. A phone call is ideal as you can recognise their voice.’

WhatsApp is now working with National Trading Standards on its Friends Against Scams campaign to stamp out the con.

Kathryn Harnett, policy manager at WhatsApp, says: ‘If you receive a suspicious message, calling or requiring a voice note is the fastest and simplest way to check someone is who they say they are.’

An EML spokesman says: ‘As a company providing financial services in the UK, we comply with all relevant regulatory requirements, including our obligations regarding customer due diligence and transaction monitoring. 

‘As a business, we invest heavily in best-in-class fraud monitoring technology.’

A Financial Conduct Authority spokesman says: ‘If people suspect, or fall victim to, payment fraud, we urge them to report this to their bank and Action Fraud. 

We will assess the intelligence we receive and take action if we’re concerned firms are not effectively guarding against financial crime.’

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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The cheapest car insurance premium 22-year-old Lizzie can find using a comparison site is £2,680. It’s not surprising that her quotes are high, though.

The catering assistant from Leeds has only two years of driving experience and three points on her licence for speeding.

So when she is offered cover for her Seat Leon FR for just £860.63, it sounds too good to be true. And it is.

Undercover: Money Mail reporter Fiona Parker (pictured) posed as a 22-year-old driver struggling to find affordable motor insurance

Undercover: Money Mail reporter Fiona Parker (pictured) posed as a 22-year-old driver struggling to find affordable motor insurance

The quote has come from a ‘ghost broker’ selling worthless car insurance on social media site Instagram.

The crooks lure in motorists with offers such as ‘70 pc discounts’ and guarantee to insure drivers at rock-bottom prices.

But the insurance scam leaves victims uninsured and at risk of hefty fines and even a driving ban.

The fraud, which investigators say is soaring, is also adding around £50 to the cost of all policies as firms recoup losses.

Web of lies

Whereas ghost brokers used to post flyers in telephone boxes or approach victims in pubs, they are now touting for business on social media sites such as lnstagram, Facebook and Twitter.

In some cases the scammers will just pocket the money and send fake documents to the customer.

In others they will approach insurers for quotes, but provide falsified details to get a cheaper deal. This means the policy would be invalid should the customer ever need to claim.

Scam: A ghost broker on Instagram offering cheap car insurance

Scam: A ghost broker on Instagram offering cheap car insurance 

A quick search for ‘cheap car insurance’ on Instagram yielded dozens of results.

Posing as ‘Lizzie’, I find a broker using the name @car_insurance_specialists. The account has nearly 2,000 followers and promises to ‘beat your current quote by around 50 per cent or more’.

But with the help of insurer LV=, I soon find the bargain price offered is a sham. The firm’s data experts track the car registration number I provided to the ghost broker to monitor any requests for quotes.

They discover that, in a bid to drive down the price, the broker submits details that differ from the information I gave them.

It claims Lizzie is a married chartered accountant who lives in Cornwall, rather than a catering assistant from Leeds.

The broker also says her average mileage is just 4,000 miles a year — around half of the typical amount clocked up by UK drivers.

It means that if ‘Lizzie’ had purchased this policy, her insurance would be invalid and she could face a bill of thousands of pounds if her car was stolen or damaged.

Police can also seize and crush uninsured cars and slap owners with a £300 fine and six points on their licence.

Insurance crooks are luring in motorists with enticing offers such as '70% discounts', '£100 referral fees' and guarantees to insure young drivers at rock bottom prices

Insurance crooks are luring in motorists with enticing offers such as ‘70% discounts’, ‘£100 referral fees’ and guarantees to insure young drivers at rock bottom prices

Instagram sham

Another Instagram account called @Matrix.insurance, which has 1,500 followers, offers ‘Lizzie’ cover for £1,356.

There is a £200 admin fee — but even once this is added it is still a £1,124 saving on the best comparison site deal of £2,680.

The person running the account says that if I do not sign up within 48 hours, the premium will soar. ‘All quotes from Saturday are coming up triple — £3.6k plus.’ Yet experts say prices would not suddenly increase in this way.

A quick check on the City watchdog’s website (register.fca.org.uk) reveals that the Instagram brokers are not registered with the Financial Conduct Authority, which is a legal requirement.

No cover: The insurance scams leave victims uninsured and at risk of hefty fines and even a driving ban

No cover: The insurance scams leave victims uninsured and at risk of hefty fines and even a driving ban

Surge in fraud

In the past year alone, 21,000 fraudulent motor policies were reported to the Insurance Fraud Bureau — nearly 60 every day. 

The organisation says ghost-broking scams now account for a quarter of its investigations, up from one in eight in 2016.

The number of ghost brokers uncovered by insurer LV= has jumped by two thirds over the past two years. It currently has 20 open organised fraud inquiries, totalling £2 million.

Insurers still have to pay for a third party’s damaged vehicle even if a driver has given them false details. 

Firms can try to claim these back from the driver, but many end up having to foot the bill, and hike premiums to cover any losses.

If the other driver is injured, a claim will be made to the Motor Insurers’ Bureau, which pays out to victims of uninsured motorists. This is funded by insurers so costs are added to premiums.

Stricter checks

Experts say insurers could be doing more to stop fake policies.

But scammers have been known to use stolen identities when applying for cover. Axa is currently investigating one ghost broker that uses names and addresses of real people to secure policies.

James Blackham, chief executive of insurer By Miles, says: ‘We want to see social media companies searching out and removing ghost brokers on their platforms today, and not just wait for legislation to enforce this.’

An Instagram spokesman says: ‘Fraudulent activity is not allowed on Instagram and we have removed the accounts brought to our attention. 

‘We’re dedicating significant resources to tackle this industry-wide issue.’

f.parker@dailymail.co.uk

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