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The UK Payments Systems Regulator (PSR) has published a consultation paper on authorised push payment (APP) scams, proposing further measures to fight this form of fraud, which has grown significantly within the first half of the year.
The PSR is proposing that the largest banks publish fraud data, improve intelligence sharing to better detect and prevent APP fraud, and mandatory reimbursement for victims of scams.
APP fraud has grown to record levels over recent years, with the PSR noting a 71 percent increase in this type of scam, causing consumers £355m in losses in the first half of 2021 and overtaking card fraud losses for the first time.
APP fraud happens when a person or business is tricked into sending money to a fraudster who poses as a genuine payee.
One of the key tools to fight fraud is Confirmation of Payee (CoP), which alerts consumers in case the recipient's account name does not match the name of the intended beneficiary.
In 2019, the PSR directed the six largest banking groups to introduce CoP over Faster Payments and CHAPS transactions. In addition to these banks, which represent 90 percent of transactions over Faster Payments and CHAPS, several other PSPs have joined the initiative, and now there are more than 1m CoP requests registered every day.
After reviewing market input, the PSR concluded the first phase of implementation of CoP has proved to have had a positive impact. It not only reduced misdirected payments but prevented an even larger increase in APP fraud.
Although CoP is an important tool to fight APP fraud, there are concerns that the service alone will not be enough to fully eliminate the scam.
Previously, both the PSR and Pay.UK told VIXIO that CoP is an important tool for the industry to combat fraud but it is not a silver bullet.
To further these efforts, the PSR is proposing the 12 largest banking groups in Great Britain and the two largest banks in Northern Ireland to publish data on their performance in relation to APP scams. This would include reimbursement levels for victims and data on which bank and building society accounts are being used to receive the fraudulent funds.
To improve scam prevention, the PSR would task the industry to improve intelligence sharing.
Finally, the regulator would make it mandatory by law to reimburse victims of scams who have done nothing wrong. This comes just one week after consumer association Which? revealed banks refused to reimburse victims in 73 percent of APP fraud cases where they should have received reimbursement.
Hence, the association asked the government to swiftly give the PSR the power to introduce mandatory APP fraud reimbursement for all firms using Faster Payments.
John Glen, economic secretary to the Treasury has now said “the Government will also legislate to address any barriers to regulatory action at the earliest opportunity.”
PSR’s Chris Hemsley added, “we are also setting out the way to make reimbursement mandatory for those blameless victims so that, when the law is changed, we are ready to act as quickly as possible to get protections to the people who need them.”
The move has been welcomed by Which?, who hailed it as a ‘huge win for consumers.’
“People are still losing life-changing sums of money every day, so the Treasury must move swiftly towards introducing the necessary legislation,” said Anabel Hoult, the organisation’s chief executive, who added that the regulator must also ensure it is ready to put in place mandatory reimbursement rules the moment that legislation is passed.
The banks must cooperate fully with putting in place these long overdue requirements, she continued.
The regulator is accepting submissions to the consultation until 4 January 2022 and plans to publish a policy statement with the measures in the first half of 2022.
