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The UK’s Financial Conduct Authority (FCA) has launched a consultation to address rising concerns about authorised push payment (APP) fraud, where individuals are deceived into authorising payments to fraudulent accounts.
In the consultation, the regulator is proposing changes to its Payment Services and Electronic Money Approach Document.
This comes in response to the Treasury's proposed amendments to the Payment Services Regulations (PSRs 2017), which would allow payment service providers (PSPs) to delay transactions if fraud or dishonesty is suspected.
The updates aim to guide PSPs on implementing the new rules while minimising the impact on legitimate payments.
The FCA is also consulting on how PSPs should manage suspicious inbound payments while maintaining efficient processing.
The regulator invites input from a broad range of stakeholders, including PSPs, trade bodies, credit institutions, payment institutions (PIs), electronic money institutions (EMIs) and consumer groups, as well as consumers, charities, retailers and law enforcement agencies.
“The aim of this consultation is to ensure the guidance helps industry to take a targeted approach to using the flexibility in the payment delays legislation,” it says. “In particular, we would like input on whether we can include further examples in the guidance to clarify how and when PSPs should use the payments delay legislation.”
Key questions raised by the FCA
The FCA’s consultation document requests input on a series of topics, including:
- Risk indicators: The FCA is seeking feedback on additional factors that might signal the risk of fraud in payment orders, and it invites PSPs to provide input on potential risk indicators that could help strengthen fraud detection.
- Threshold for payment delays: The consultation asks whether the guidance provides enough clarity on when PSPs have "reasonable grounds to suspect" fraud and can delay payments. Here, the FCA says that it wants to ensure that PSPs can apply this threshold without affecting legitimate transactions.
- Use of four-business-day delay: The FCA is exploring whether PSPs need more guidance on how to use the four-business-day window allowed for investigating potentially fraudulent transactions.
- Notification obligations: The FCA is consulting on whether PSPs should be required to notify payment initiation service providers (PISPs) when payment delays occur. The consultation also seeks feedback on how best to manage communication between PSPs, PISPs, and other stakeholders during such delays.
- Inbound payment delays: The FCA is also reviewing whether PSPs need further clarity on delaying inbound payments when fraud is suspected, especially in relation to existing force majeure provisions under the PSRs 2017.
“We want to ensure that the revised Approach Document meets the needs of PSPs by providing a clear explanation of how we expect PSPs to comply with the new payment delays legislation,” the consultation says.
“This will enable PSPs to adopt an approach to implementing the new regulations that reflects the legislation’s intended purpose.”
Stakeholders in the payment services space are encouraged to submit feedback by October 4, 2024, and the FCA has said that final guidance should be expected by the end of this year.
