Investment scam victims make, on average, dozens of payments and lose tens of thousands before realizing that they’ve been tricked. Some Revolut customers go to extreme lengths to get their money back. However, their reimbursement claims are almost always rejected.
The “applicants X.X.” could tell you some of the most interesting lesson-learning stories, filled with social engineering, greed, and substantial financial losses. However, this abbreviation not only hides the name but also strips all the details, leaving no room for emotion or nuances. Even the country of origin is not disclosed.
After obtaining its license in Lithuania, Revolut, a global neo-bank and financial technology company, saw “applicants X.X.” file their complaints with the Bank of Lithuania, the financial supervising authority in the small European country.
For months, one Revolut user thought he was investing through the Global X investment platform. Promised substantial returns, he made 28 payment transactions to accounts in the cryptocurrency exchange platform Binance, totaling a staggering €126,566. All payments happened in the period of a few months, between October 6th, 2022, and February 22nd, 2023. He woke up in May, realizing that he’d been scammed.
Another woman, also an “Applicant X.X” from Revolut, initiated thirteen transactions to Puregold SGD and Pg Pay accounts last year. In total, €52,544 went to an allegedly fraudulent broker known as Brokeragea.
Yet another investor made 29 payments of €54,469 to accounts in Binance and Moonpay, enticed by the Ariol Investment Group this summer.
“An employee of the said company contacted him and offered him to start investing,” the featureless document describes.
The fourth “applicant X.X,” tempted by the Brokeragea’s investment offers, transferred €145,000 in three lumps.
Those are just some of the latest cases from the previous months, which have a consistent pattern. The promised returns on investments were never fulfilled, the brokers were consistent in delivering minus 100%.
The investment fraud victims then contacted Revolut to request a refund following many transactions, but Revolut denied these requests, stating that the customer had authorized the payments. Then, as a last resort, the customers filed complaints with the Bank of Lithuania, where they were again rejected. In theory, clients could still go to court.
"Having established that the bank properly executed the applicant's authorized disputed payment transactions, meaning in compliance with legal provisions, there is no basis to deem the applicant's claim for the reimbursement of lost funds during the disputed payment transactions as justified,” the bureaucratic mumbo jumbo usually reads, claiming that the transactions were confirmed by the "3D Secure" method.
However, the stories of Applicants X.X. in the UK have different endings, as bank users here may be eligible for reimbursement when they are not to blame for the success of an Authorised Push Payment (APP) scam.
The Financial Ombudsman Service in the UK returned more than £150m to fraud victims. In continental Europe, bank clients have to rely on their own financial literacy.
Users of the same Revolut app in different countries could have different protection.
In the UK, £150m returned to victims
During the first half of the year, 13,252 similar complaints for all frauds and scams, including APP scams, ID theft, and chip and pin disputes, were filed just with the Financial Ombudsman Service in the UK, Pat Hurley, the Ombudsman Director revealed. The uphold rate, or the number of resolved complaints in that period, was 47%.
“Being the victim of a fraud or a scam can be a life-changing experience – both financially and emotionally – but support is available. In recent years, we have investigated thousands of cases, returning more than £150m to those who have fallen victim to fraud and scams,” Hurley says.
Currently, the Financial Ombudsman is receiving around 200 APP scam complaints every week. This free and independent service is established to resolve financial disputes informally and fairly when complaints with businesses do not reach a satisfactory resolution.
Different countries have different protection schemes and rules. In the UK, users of authorized financial firms are protected by a voluntary Code called the Contingent Reimbursement Model (CRM) Code, which came into force in May 2019. Signed-up financial institutions must reimburse victims of APP scams “in all but a limited number of circumstances.”
“If a consumer isn’t protected by the CRM Code, we’ll take into account regulators’ rules and guidance, relevant codes of practice and what we consider to be good industry practice. This helps us decide whether a firm ought reasonably to have recognized that its customer was at risk of financial harm from fraud, and ought to have taken steps to warn them before allowing payment to debit their account,” Hurley explained.
He notes that it’s essential for bank customers to check their agreement to understand which entity they’re a customer of. For example, the UK or elsewhere.
“We're continuing to see fraudsters trying to stay ahead of the game by evolving their methods of scamming consumers. People should be extra vigilant, whether that's online, over the phone, or receiving messages and emails,” Hurley warned.
EU authority bets on financial literacy
In Europe, banks usually have no obligations to reimburse APP scam victims. In the United Kingdom, Revolut payment services are provided by Revolut Ltd, meanwhile, in Lithuania and EU states – by a separate firm, Revolut Bank, UAB.
During the first half of 2023, the Bank of Lithuania, where Revolut has its EU license, dealt with a total of 115 disputes related to financial fraud cases.
In 89 disputes where decisions were made, consumers reported a total loss of approximately €1,570,000, with an average of around €17,640 for each case. The amounts lost varied from a few hundred to around a hundred thousand euros.
The legal protection of payment service users in Lithuania is similar to that in other EU/EEA states.
How do such cryptocurrency scams evade detection until it’s too late?
To Rosvaldas Krušna, the Adviser to the Board member of the Bank of Lithuania, the core problem lies in the concept of cryptocurrency, with its anonymity and specific way of distribution, allowing scammers to slip through the oversight. Crypto enables scammers to operate anonymously. Related services and various platforms lack supervision and also play a significant role in exploiting fraudulent schemes.
“Of course, unreasonable trust in strangers and non-checking their information in time also contribute to the late detection of scams,” Krušna said. “The Bank of Lithuania is making every effort to raise financial literacy regarding fraud, especially investment fraud that is quite often related to cryptocurrency scams.”
While explaining the dangers to the public, the Bank of Lithuania also blocks the websites of fraudsters in Lithuania.
“It is worth mentioning that when a customer initiates a transaction by themselves or through third parties, a payment services provider is legally obliged to execute it,” Krušna explains the problem.
However, financial firms in Lithuania, according to the Bank of Lithuania position, themselves should not participate in activities or provide services associated with crypto-assets.
“If financial institutions provide financial services to customers engaged in high-risk industries (including activities associated with crypto-assets), financial market participants should take appropriate measures to manage these money laundering and terrorist financing risks. Failing to do so might impose fines, restriction of business or even revocation of license”, Krušna cited.
The Bank of Lithuania, as well as other European supervision institutions, have constantly raised awareness of the risks posed by crypto services by issuing warnings, positions, and submitting legislative proposals. Europe-wide MICA regulation should introduce crypto services licensing.
“However, one of the most important things is to increase the level of financial literacy, to help people to recognize and avoid scams and fraud,” Krušna concluded.
Revolut says it is working hard to protect and support customers
Revolut explained it has a series of limits and interventions to protect customers and block suspicious crypto payments.
“Revolut takes the protection of its customers extremely seriously and is fully aware of the industry-wide risk of customers being coerced by organized criminals,” Revolut’s spokesperson said.
The spokesperson confirmed that most cases involve authorized push payment (APP) fraud, where scammers persuade someone to transfer funds into another account under false pretenses.
Fraud cases are rising across Europe, with more than €1.8 billion worth of fraudulent activity reported in 2022, according to European Anti-Fraud Office OLAF.
“Revolut works hard and invests heavily to protect and support customers. We take a data-driven approach to identify scam activity and use sophisticated fraud modeling for both inbound and outbound transactions to protect Revolut customers from falling victim to fraud, including clear, unskippable warnings and direct interventions by our specialist fraud prevention teams,” the spokesperson said.
Revolut recently introduced weekly card transaction limits for customers transacting with particular categories of merchants to help keep customers’ money safe.
The firm promises that each potential fraud case is carefully investigated and assessed independently of other cases.
“Equal protections are afforded to customers who are potential victims of APP fraud in the UK and EEA. All European clients belong to Revolut Bank UAB, which falls under Lithuanian jurisdiction. Additionally, Revolut Bank UAB has three live branches (in Ireland, France, and Spain) where local laws are also applicable,” the comment reads.
Protect yourself from scams
Revolut has prepared some advice to consumers on what measures they can take to help keep their money safe:
- Be suspicious of ‘too good to be true’ offers or prices.
- Shop with retailers that are reputable and reliable. As a rule of thumb, their website URLs should start with 'https,' not 'http.' Look for a padlock icon before the website name, indicating the site is secured with a digital certificate.
- Never divulge PINs, passwords, one-time passcodes, or personal details over the phone or to an online chat support.
- Read online reviews to check websites and sellers are genuine, and ask to see high-value items in person or via video, as well as getting copies of documentation to ensure the seller owns the item.
- Purchase branded items from the list of authorized sellers listed on their official websites.
- Always access the website you’re buying from by typing it into your web browser. Don’t follow links in unsolicited emails or texts.
- Always ensure you click ‘log out’ or ‘sign out’ of websites
- Remember that fraudsters may ask you to pay by money transfer instead of a card payment.
- If you get a message from Revolut saying the payee doesn’t match, stop the transaction and investigate.
To help spot and avoid common scams, Revolut has prepared an in-app Fraud Learn Course with interactive quizzes. Also, the Fraud and Scams hub provides further information and support materials.
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