PSD3 Watch: MEP Raises Prospect Of New Fraud Prevention Measures

February 8, 2022
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A Dutch member of the European Parliament (MEP) has probed the European Commission on the possibility of introducing delay and chargeback options for SEPA transfers to new IBAN accounts.

A Dutch member of the European Parliament (MEP) has probed the European Commission on the possibility of introducing delay and chargeback options for SEPA transfers to new IBAN accounts.

The payments industry in the EU is awaiting the possible changes that could come from the revised Payment Services Directive (PSD2) review.

Now, an MEP has asked for fraud-related reforms to be included in the next package.

“In order to increase consumer confidence in the European internal market and financial system, the further reduction of fraud involving bank transfers is very important,” said Antonius Manders.

Manders, who is a member of the Netherlands’ Christian Democratic party, pointed out that PSD2 makes no provision for delay and chargeback options for a first transfer to a new IBAN account number in a further bid to combat fraud.

This could be done by making use of a suspense account, for example.

“Under the latter option, the beneficiary would receive an immediate notification of payment but would only be able to access the amount after one day, enabling the payer to reverse the payment in the event of fraud, once reported to the police,” he said.

Manders, who sits on the European Parliament’s internal market and consumer protection committee, asked:

  • Does the commission agree that, in order to bolster confidence in the financial system and the EU internal market, it is necessary to introduce a delay and chargeback option for SEPA transfers to new IBAN account numbers (as with credit cards) or to come up with a more effective fraud prevention system?
  • If so, will the commission table proposals to this effect as part of the PSD2/PSD3 review procedure?

Manders submitted a second question to the European Commission alongside this. This was also on the subject of IBAN numbers.

Here, he pointed out that following the introduction in the Netherlands of the confirmation of payee (CoP) system, the number of fraudulent domestic transfers has dropped by 81 percent.

“At the same time, Dutch banks are reporting a massive increase in the number of fraudulent transfers to European IBAN account numbers, seriously undermining confidence in the European internal market,” he pointed out.

Putting the commission on the spot, Manders asked whether it agrees that the EU-wide introduction of a CoP system, similar to what is used in the Netherlands, “is of great importance in order to bolster confidence in the financial system and the European internal market?”. He enquired what steps are currently being taken to introduce such a system at the EU level and when the commission expects such a system to be operational across the 27 member states.

The commission has previously suggested that these changes could come to fruition.

In the 2020 EU Retail Payments Strategy, it stated that “for payments posing a higher fraud risk, the commission will assess whether requiring a match between the beneficiary name and IBAN may be effective in preventing frauds, such as ‘social engineering’ where people are manipulated into performing actions or divulging confidential information".

Furthermore, a key action in the strategy document committed the commission to using the PSD2 review to take stock of the impact of strong customer authentication on the level of payment fraud in the EU and explore whether additional measures should be considered to address new types of fraud, in particular with regard to instant payments.

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