NatWest banned its one million online customers from setting up any new direct debits or standing orders yesterday in response to an escalating phishing scam, where fraudsters encourage customers to send personal banking details by e-mail.

The move was a recognition of the sharp rise in phishing attacks, and their increasing plausibility. The bank was also responding to comments from the City’s chief watchdog, which gave warning last week that banks had to be more preventive in their measures against phishing.

The action by the bank could be followed by others, as it faces an onslaught from criminals who target customers by e-mail, demanding to know personal banking details. The bank said that it had stopped its online customers setting up accounts for servicing third parties to prevent money being switched out of the country.

NatWest said that it had had to take action to protect against fraud. “Nobody has lost any money as a result of our pre-emptive measures,” it said.

In the phishing scam, fraudsters target e-mail addresses, demanding that the recipients of e-mails provide personal details. The criminals then arrange for money to be transferred out of the country.

NatWest said that by suspending the creation of standing orders and new third-party payments, the bank was preventing its customers’ money from being sent to accounts abroad. Money has been passed to jurisdictions as far apart as Romania and Nigeria.

The bank pointed out that customers wishing to set up new payments could use other methods, such as telephone banking. NatWest also said that it was not the first time that it had had to take such action, but added that anyone who was defrauded would be reimbursed. The bank said that it, with the other banks, had posted warnings over its internet banking site more than 18 months ago, when the fraudsters made their first attacks.

The other main clearing banks said that they had not felt it necessary to take such action, despite being the target of similar attacks.

Phishing incidents have been increasing, despite intervention by the National Hi-Tech Crime Unit, which attempts to trap the fraudsters. So far banks have been willing to reimburse customers. HBOS, the fifth-biggest bank, which owns Intelligent Finance, the online and direct bank, said that it had a fraud insurance policy to reimburse victims.

Sandra Quinn, a spokeswomen for Apacs, said that from September 2003 to June 2004, customers had lost £4.5 million in the scam. She said: “This represents 1 per cent of the total amount that is defrauded on credit cards.” That figure was rising rapidly, she said.

The Financial Services Authority (FSA), the lead City watchdog, gave warning last week that the banks would have to take preventive measures against fraud. Philip Robinson, the head of the FSA’s crime division, said in a statement, that: “In the fight against fraud, firms will have to run to stand still if they are to protect their assets and those of the customers.”

In a review of 18 companies, the FSA found that although some had responded to the threat of online fraud, overall, the companies could have done more to address potential security risks.

The FSA said that the main banks should continue to be alert over traditional fraud, and gave warning that they should properly vet recruits. The FSA pointed out that organised criminal gangs deliberately put staff in financial firms to gain access to sensitive information.

Banks themselves are not immune from helping the criminals. This month Cahoot, owned by Abbey, was forced to close down its site for ten hours to carry out repairs after a change to its systems meant that online banking customers could potentially view other people’s account details.

GONE PHISHING

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