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The City regulator has called on banks and payment firms to bring in stricter controls protecting customers from romance fraud after a study showed a number of missed “red flags” that led to people losing huge sums of money.

The review by the Financial Conduct Authority (FCA) highlighted one case where someone lost £428,000, another where a customer made 403 payments totalling £72,000 to a fraudster and a case where someone wanted money to transfer cryptocurrency to their “partner” in Iraq.

Romance scams, where criminals try to build emotional connections with victims before defrauding them, have been growing in scale and complexity in recent years.

Figures from the City of London police put the loss from romance fraud at £106m last year, although the FCA says the real figure is much higher as many people do not report the crime owing to feelings of shame and stigma.

The FCA review of six banks and payment firms looked at how they detect and prevent romance fraud and found large disparities in how victims of fraud were treated. “Despite examples of good practice, there were multiple instances of firms missing opportunities to identify seemingly suspicious transactions,” it said. The study found 60 fraud cases, ranging from £100 to £428,249.

Most of the scams (85%) emerged from relationships built by the fraudsters on social media and dating sites. In one case, a firm failed to identify fraud when six payments totalling more than £131,000 were sent overseas.

In almost half of the cases, the victims did not give the real reason for payments. In another fraud that went through, a victim made 15 international payments, worth £190,000, and claimed to be buying international property. But the staff handling the transactions did not seek documentation or question the use of multiple accounts in different names, said the report.

The FCA report said some firms did not properly safeguard victims after the fraud emerged, even though there were clear signs they were vulnerable. “For example, one victim expressed suicidal thoughts and another received threats of violence from the fraudster,” it said.

The watchdog said banks and payment providers could bring in measures to better protect customers, including improved monitoring systems, better training for staff and providing compassionate aftercare.

Steve Smart, the FCA’s joint executive director of enforcement and market oversight, described romance fraud as a “vicious crime”, adding: “All too often it is the vulnerable that fall victim. The impact – financially and personally – can be devastating.”

Fraudsters typically try to identify people who are lonely or isolated. They often claim to be working abroad, and are therefore unable to meet, and say they need money to fund a medical emergency.

Santander has said it has seen almost £5.5m stolen through romance frauds since the start of the year. Michelle Pilsworth, the bank’s head of fraud, said the criminals increasingly ask for gift cards from victims.

The consumer group Which? said banks and payment operators that fail to protect customers should have action taken against them.