Fraudsters are now operating at an industrial scale, warns Arbiter for Financial Services

Malta’s Arbiter for Financial Services Alfred Mifsud sounded a grave warning about the sharp rise in sophisticated financial fraud targeting consumers, likening the fraudsters’ operations to an industrial enterprise.

“It is heart-breaking to see the increasing incidence of consumers falling victim to ever more creative fraudsters who seem to be operating on an industrial scale,” he said, highlighting the growing psychological and financial toll on victims of increasingly complex scams.

Mr Mifsud made the statement in the Office of the Arbiter for Financial Services’ annual report, which points to a disturbing evolution in scam methodology. Whereas earlier cases involved one-off “authorised push payment” (APP) frauds, newer schemes – often dubbed “pig butchering” scams – entrap victims through carefully built online relationships, culminating in large-scale losses.

These scams are designed to simulate investment opportunities with fictitious high returns, slowly drawing victims into investing significant sums, sometimes borrowing from family or liquidating assets in the hope of a payout that never arrived.

Some of the victims were highly educated individuals, Mr Mifsud noted, underscoring that these scams are not merely preying on the uninformed but are deliberately engineered to manipulate trust, fear and greed.

In response, the Arbiter has taken two key initiatives. The first is the publication of a Technical Note guiding service providers on how to identify out-of-character payment patterns and implement effective customer warnings. The second is a legislative amendment – coming into force on 1st October 2025 – that expands the Arbiter’s remit to include victims of fraud who were not direct clients of the financial institution involved. This change eliminates a key legal loophole that previously barred such complaints from being heard.

Industry resistance to these changes has not gone unnoticed. Some service providers expressed discomfort at the proposed expansion, arguing it could open them to unwarranted scrutiny. However, the Arbiter firmly rejected this pushback, asserting that “fraud prevention measures protect and enhance the industry’s reputation to the benefit of all concerned.”

The report also reflects positively on the Arbiter’s strengthened mediation function, with 115 cases in 2024 settled or withdrawn before adjudication – up from 67 in 2023. The average time to resolve mediated cases dropped to under 90 days.

Additionally, the Arbiter’s framework for apportioning responsibility in APP fraud cases has gained recognition beyond Malta. It was presented at international forums, including the INFO Network annual conference in Toronto, where Malta’s proactive approach drew commendation from global ombudsman schemes.

Looking ahead, the Arbiter’s office plans to deepen collaboration with regulators and law enforcement to launch a national fraud awareness campaign and establish a permanent helpdesk for fraud victims.

While the volume of fraud complaints remains worrying, Mr Mifsud and his team are determined to push for a regulatory culture where redress is accessible, providers are held to a standard of fairness, and consumer protection remains paramount.