Combating Romance Fraud - FCA's Expectations

Manual intervention for high-risk payments: Some firms demonstrated effective risk management by deferring high-risk payments for manual review and temporarily blocking transactions. This “positive friction” in the payment process helped prevent fraud by ensuring staff intervention before funds are released.

Proactive use of data: Firms leveraged a range of data points to flag suspicious activity on customer profiles. Markers included previous victimisation, attempts to pay high-risk beneficiaries, and spending patterns on dating sites.

Missed opportunities: The FCA observed that some firms failed to investigate suspicious transactions, such as high-value oversea payments where there was no prior history, or sudden spikes in transaction amounts.

Overlooking financial distress: Firms should consider that unusual borrowing or signs of financial distress may indicate romance fraud, especially when combined with other risk factors.

Victim-centred investigations: The FCA highlighted the importance of a victim-centred approach, involving thorough case analysis, comprehensive information gathering, and consideration of underlying vulnerabilities.

Proactive prevention: Some firms took further steps to prevent further harm by adding fraudster to internal blocklists.

Incomplete payment analysis: Many firms focused primarily on Faster Payments, neglecting other transaction types such as cash withdrawal, card transactions, and gift card purchases. This contributed to a limited understanding of romance fraud.

Lack of victim education: Victims were often not informed about reimbursement policies for alternative payment types.

Staff training gaps: The FCA found that some staff lacked the training or confidence to critically assess customer explanations or identify red flags, such as unusual behaviour or sudden changes in circumstances. Staff should be empowered to probe further when risk indicators are present.

Effective victim engagement: Firms that engaged thoughtfully with victims – building rapport, providing tailored education, conducting follow up calls, and supporting verification of fraudster claims - were more successful in preventing further losses. Compassionate Aftercare: The FCA commended firms that offered aftercare and referrals to charities, demonstrating a commitment to supporting victims beyond the initial incident.

Delayed escalation: Some firms failed to escalate safeguarding concerns promptly, missing opportunities to protect vulnerable customers