UK FCA publishes findings from romance fraud multi-firm review

Overview

In its review of a sample of 6 firms - which included retail banks and payment firms – the FCA found areas for improvement following its assessment of 60 confirmed romance fraud cases where losses ranged from £100 to £428,249. This was the case for both well-established players and newer market entrants alike, showing there’s no room for complacency on the part of any UK payment service providers (PSPs).

Whilst the FCA acknowledged the challenges in engaging with victims who have been socially engineered, it identified ‘notable gaps’ in both payment analysis and staff capability, limiting firms’ ability to identify and respond to romance fraud effectively. It highlighted 5 key areas where it thinks more could be done by firms to prevent and detect this type of fraud, and to protect victims.

We have summarised some of the findings below.

• Dectection and monitoring: Systems must be supported by robust investigative processes and well-trained staff to detect fraud, including:
  • looking at both inbound and outbound transactions to help spot cases where fraudsters directed victims to open accounts at specific firms and transfer funds from their main bank to the new account (and then to the fraudster);
  • identifying sustained, out-of-character activity and financial distress or atypical borrowing activity; and
  • looking at all types of payments (ie not just the inclusion of transactions made via Faster Payments, but also via other methods such as cash withdrawals, card transactions and gift card purchases).
• Internal investigative approaches and staff capabilities: Staff should be equipped to probe customer responses via tailored engagement and critical questioning when risk indicators are present.

While in-app chat functions can be valuable tools for gathering real-time information and making informed decisions, over-reliance on standardised chat scripts throughout the customer journey can lead to missed opportunities and poor outcomes.

• Customer engagement and support: Whilst the FCA found many examples of strong engagement and compassionate care for victims, it also found safeguarding concerns were not always escalated appropriately, highlighting the importance of:
  • systems and processes that support and enable vulnerable customers to disclose their needs; and
  • acting in a timely manner to seize the opportunities to prevent fraud and protect vulnerable customers.
• Treatment of customers in vulnerable circumstances: The FCA highlighted the importance of ongoing support after fraud is confirmed where there were clear signs of vulnerability and reasonable grounds for concern. This included considering whether it is necessary to inform relevant authorities or the extent to which it may be appropriate to engage with a family member, friends or other third party, even without formal authorisation such as Third-Party Mandates or Power of Attorney.
• Education and awareness: Despite meaningful efforts to help customers recognise and avoid fraud, the reach and consistency of these efforts was varied. In particular, passive messaging, such as website content, may not be sufficient to engage customers at risk. One example of good practice that the FCA highlights is the development by one firm of an optional fraud learning module within its mobile banking app.

In particular, the FCA highlighted the importance of reducing the risk of re-victimisation.

Firms should assess whether their own systems, controls and customer engagement practices – including the key area of staff training - are sufficient to prevent and respond to romance fraud. There is also read-across into firms’ broader fraud strategies - a point that is emphasised by the FCA.

How can Hogan Lovells' combined legal and consulting teams help?

The combination of our legal and consulting teams provides you with a full range of services, and clear guidance on how the solutions can be applied within the business. If you would like to talk through how we can help you in light of the FCA’s romance fraud findings, please reach out to any of the people listed in this article or your usual Hogan Lovells contact.

The scale and challenges of the romance fraud problem

The FCA provides a reminder that fighting financial crime, including Authorised Push Payment (APP) fraud, continues to be one of its strategic priorities. This also aligns with the national system priorities for the financial sector which have been agreed between the National Crime Agency (NCA), the FCA, the Home Office and HM Treasury. These national system priorities include frauds that cause high levels of harm such as romance fraud, which is growing in scale and complexity. The FCA points out that there was a 9% increase in romance fraud reports in the financial year 2024/2025, amounting to losses of over £106m. City of London Police estimates for 2025 indicate an average loss of £11,222 per victim.

The FCA recognises the challenges involved for PSPs in tackling romance fraud effectively, notably:

• Fraudsters’ high-level working knowledge of the banking sector and how to circumvent anti-fraud systems and controls; and
• Victims’ deep emotional investment in the “relationship” and consequent reluctance to accept they are being defrauded.

It also acknowledges the ‘critical role’ that online platforms have in preventing and reducing harm, given that a significant majority (85%) of the cases it examined originated from online platforms, including social media and dating websites.

What’s next?

The FCA places emphasis on the need for firms to have:

• Systems that can detect relevant risk indicators; and
• Staff who are equipped to engage meaningfully with customers, identify red flags and respond appropriately, particularly in relation to vulnerable customers.

The FCA expects all firms to consider the findings and assess whether their own systems, controls and customer engagement practices are sufficient to prevent and respond to romance fraud. As mentioned above, it also emphasises that the findings should inform firms’ broader fraud strategies.

Authored by Charles Elliott and Virginia Montgomery.