In a move to counter Authorised Push Payment (APP) fraud, the government is enhancing the legal framework for fraud prevention. Recent draft legislation lays out new measures to empower payment service providers (PSPs). Including banks, in their efforts to stop and investigate fraud more effectively.
Extending Investigation Timeframes for PSPs
A pivotal aspect of this legislative update is the extension of the investigation window for PSPs. Previously confined to a mere 24 hours, PSPs will now have up to 72 hours to delve into suspicious transactions. This extension aims to significantly bolster efforts against APP fraud, where victims are duped into transferring funds to criminals.
This increased timeframe allows for more comprehensive analysis and collaboration with law enforcement. Enhancing the chances of identifying and stopping fraudsters before funds are irretrievably lost. By giving PSPs more time, the government acknowledges the complexity and sophistication of modern financial scams. Signalling a commitment to more robust fraud prevention measures.
HM Treasury’s Vision
HM Treasury elaborates on the legislation, underlining its goal to mitigate the surge in Authorised Push Payment incidents. By proposing amendments, the government seeks to provide payment institutions with the necessary time to conduct thorough investigations. The Treasury’s initiative has garnered support, particularly from the Lending Standards Board (LSB). Which currently supervises APP fraud prevention, detection, and reimbursement framework.
This proactive approach aids in preventing fraud and is crucial in educating customers about the risks of APP scams. Fostering a new culture of vigilance. The mandatory communication ensures transparency in the banking sector’s efforts to combat fraud, building trust between PSPs and their customers while simultaneously protecting them from potential financial harm.
A Sector-Wide Approach to Fraud Prevention
Emma Lovell, Chief Executive of the LSB, emphasises the detrimental impact of APP scams on consumer trust and the financial ecosystem. She highlights the necessity of a unified, sector-wide strategy in combating fraud. Lovell advocates for all PSPs’ mandatory reimbursement for APP fraud victims, as outlined in the forthcoming Payment Systems Regulator framework, stressing the importance of not neglecting prevention and detection efforts.
The Treasury’s proposal includes more than just extending investigation timelines. Another measure allows PSPs to postpone outbound payments for up to four business days if APP fraud is suspected. Importantly, PSPs must inform customers about any payment delays and their reasons unless doing so would breach laws, such as anti-money laundering or economic crime legislation.
Focus on UK Transactions
The new legislation specifically targets APP transactions conducted within the UK and in British pounds. Additionally, SMEs have the option to opt out of certain provisions, in agreement with their PSP, to ensure timely payments to suppliers. It’s worth noting that while the 2017 act is being amended for outbound payments, inbound payments will remain unchanged, with the Financial Conduct Authority (FCA) set to engage with PSPs post-approval.
This focus on outbound payments reflects a strategic approach to curbing financial losses directly resulting from APP fraud. Addressing the immediate risk to consumers’ funds. By allowing SMEs to opt-out under specific conditions, the legislation acknowledges the delicate balance between fraud prevention and the operational needs of businesses. Ensuring that the flow of commerce is not unduly hindered. The FCA’s engagement with PSPs highlights the ongoing regulatory oversight and commitment to refining their approach. Ensuring that regulations evolve in response to the dynamic nature of fraud and the needs of both consumers and businesses.
A Growing Priority for Financial Authorities
Combatting APP fraud is increasingly vital for the UK’s financial bodies, including the Treasury, the FCA, and the Payments Systems Regulator (PSR). Following the PSR’s adoption of new APP fraud reimbursement rules, the Treasury’s draft legislation marks a significant step forward in fraud prevention and detection.
These concerted efforts represent a multi-faceted approach to tackling fraud, emphasising the need for immediate reactive measures and the long-term benefits of establishing a framework that prioritises consumer protection and fraud awareness. By aligning the objectives of various regulatory bodies and updating legislation, the UK is setting a precedent for comprehensive and effective fraud prevention strategies that could serve as a model for other countries grappling with similar challenges.
A Call for Industry-Wide Standards
To combat APP fraud effectively, Lovell calls for the establishment of a new Authorised Push Payment Fraud Prevention Standard. Such a standard would ensure a consistent, industry-wide approach to halting scams, which is essential for safeguarding consumers and maintaining the financial system’s integrity.
Through these legislative updates and concerted efforts across the financial sector, the UK aims to significantly reduce APP fraud’s prevalence. By enhancing the legal framework, extending investigation periods, and fostering sector-wide collaboration, the path to more robust fraud prevention and awareness becomes more apparent, marking a crucial step in protecting consumers from the perils of fraud.
