Some of the UK banks have begun screening customer transactions in an attempt to stop what they call “boiler room” fraud.

It is estimated that up to 30,000 people are losing hundreds of millions of pounds each year to such share scams according to the Financial Services Authority (FSA).

This is when criminals call potential investors to sell shares which are effectively worthless. But banks such as Barclays and HSBC said they have suspended such transactions if they are being paid to known boiler room firms.

Saving Customers Millions!

Together, the banks use a warning list that has been published by the FSA containing the names of hundreds of companies. The FSA says these companies aren’t authorised to pose a high risk to customers.

According to Barclays, there have been around 150 transactions blocked since the introduction of the screening scheme in February, thus potentially saving customers millions.

It adds that around 90% of customers choose to cancel such transactions once warned that the company they are paying is on the warning list, but 10% still go through with the transaction.

HSBC has been using the screening procedure since 2006, and also claims to have saved customers millions.

Most Customers Follow Banks Advice

A spokesman from the bank explained: “If we receive requests for payment to any of these companies we will delay payments until we have checked with our customers to ensure that they are aware of the company’s activities.”

“Usually, when customers realise that the companies in question are on the non-authorised list, they want to stop the payment.”

The FSA and police from Operation Archway in London have been working together for years to track boiler room fraud.

According to officers, the fraudsters are usually persuasive, getting customers to shed out tens of thousands of pounds.

Detective Superintendent Bob Wishart said: “We’re having some notable successes. If we can help them identify potential fraud and a bank is 100% happy that it is a potential fraud, then it can take the appropriate action.”

More Measures Needed

Jonathan Phelan of the FSA agrees that banks are making an important contribution to the effort to stop such frauds, but screening can’t be completely successful alone.

“We are in discussion with banks. It is a very difficult area. There’s a certain amount of intrusion about it, so one has to be careful about promoting it too much.”

The FSA and police say they have had some success shutting down some operations and prosecuting the criminals involved. The FSA claim to have recently closed down 6 boiler room agents, recovering nearly 3 million pounds of investors money from 4 boiler room operations.

Operation Archway officers also say they are involved in a dozen major boiler room investigations.

What Do You Think?

Have you been the target of one of these operations? Do you have any advice for others? Are banks, the FSA and the police doing enough to track down these criminals? Have your say here.