UK high street lenders toughen crypto stance on fraud concerns

UK lenders are toughening their stance on cryptocurrencies, citing a growing wave of scams involving highly volatile and speculative assets.

Their stance contrasts with some fintechs pushing deeper into the sector, despite falling prices and collapsing major players. FTXone of the world’s largest crypto trading platforms, unfolded in spectacular fashion last week with rival Binance dropping an eleventh-hour bailout and leading to contagion fears.

“FTX’s collapse is just another data point that tells us we did the right thing,” said Paul Davis, director of fraud prevention at TSB, which blocked the buys. of crypto last year. “The risks to consumers are enormous.”

Santander UK and Virgin Money have taken action to limit or prevent customers from buying cryptocurrencies in the coming months.

Santander said earlier this month that it will limit the amount customers can spend on cryptocurrency exchanges using online and mobile banking payments from November 15. to block all faster payments to cryptocurrency exchanges next year.

Virgin will restrict existing customers as well as new customers from purchasing cryptocurrencies by the end of this month.

“Due to the increase in the number of fraudsters using cryptocurrency to obtain funds, we have written to customers to let them know that we will no longer be processing cryptocurrency payments in the future,” Virgin said. .

Their measures reflect the cautious approach taken by most high-street lenders towards cryptocurrencies, which a senior banker said had become “the main cash-out route” for fraudsters.

While TSB became the first bank to ban all cryptocurrency payments from customers last year, lenders such as Lloyds, NatWest and Virgin banned cryptocurrency credit card purchases in 2018.

A number of lenders also started blocking payments to Binance in 2021, after the Financial Conduct Authority said it was Unauthorized to undertake crypto business in the UK.

Barclays does not currently limit payouts to exchanges except Binance, while other lenders, such as NatWest, limit payouts to specific exchanges which they say pose “the highest risk of financial harm”. .

Annual losses from crypto fraud reported to Action Fraud, the UK’s national reporting centre, had topped £160 million by the end of August, already more than the amount for all of 2021.

“It’s just a paradise for scammers,” said a senior executive at one of the biggest high street banks, with more than a fifth of payouts at some exchanges being fraudulent. “We need to regulate crypto and we haven’t.”

A House of Lords report released on Saturday also raised concerns about the use of cryptocurrencies for fraudulent purposes and called on the government to work with the private sector to tighten “know your customer” controls.

“We think it’s understandable that banks are treating it as a red flag,” said Baroness Nicky Morgan, chair of the House of Lords committee behind the report and non-executive director of Santander UK. “From the evidence we’ve heard and seen, crypto is often implicated in cases of fraud.”

The FCA said last month that the number of potential crypto scams reported by consumers jumped 55% in the year to the end of March, compared to a year earlier.

The regulator said it did not order banks to stop allowing transfers to cryptocurrency exchanges, but stressed that digital assets are “high-risk and largely unregulated investments.”

The upcoming Financial Services and Markets Bill will allow for greater regulatory oversight of the crypto sector. Currently, the FCA only oversees the companies’ approach to anti-money laundering.

CryptoUK, a trade body for the digital asset industry, said fraud was increasing across the board, not just related to cryptocurrencies.

“There are many ways scammers can try to trick you into parting with your digital money. We urge investors to be smart and do their due diligence,” he added.

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