UK Banks Will be Required to Compensate Fraud Victims by A Regulator

The government has stated that it will alter legislation in order to assist more victims of authorized push payment frauds in receiving reimbursement from banks and payment service providers. When a payer is duped or tricked into authorizing a payment to a criminal, banks are currently encouraged to refund victims freely. 

Now, the government has indicated it will draught a legislative reform “as soon as parliamentary time permits” to give the Payment Systems Regulator the authority to compel companies to compensate victims in cases where it deems it appropriate.

The UK’s payment services regulator is seeking the authority to compel banks to compensate blameless victims of “push payment” scams, citing “discontinuities” in the present voluntary approach.

Scammers see opportunities to target us in these uncertain times. We can guide and support you, contact us now!

What is Push Payment Fraud? 

Authorized push payment fraud, often known as APP fraud, occurs when criminals fool consumers or employees at a business into sending a payment to a bank account controlled by the fraudster under false pretenses. 

Real-time payment mechanisms are irreversible, victims cannot retract a payment once they discover they have been duped. The method used by the con artists is not new. To set up their victims, they use social engineering techniques and may hack into email and other networks.

These techniques of attack are utilized in a variety of attacks; however, with authorized push payment fraud, scammers can deceive victims into sending money to them through real-time payment networks. 

The pool of prospective victims grows as more customers and businesses adopt simple ways to move money in real-time, a trend accentuated by the COVID issue, which pushed more individuals to use online banking.

Because money is transmitted immediately, fraudsters can shift payments across many accounts in a practice known as layering in order to launder the proceeds of the crime and make tracing them more difficult. 

These crooks are cunning and ingenious, and their victims cannot be dismissed as gullible morons. Because real-time payment systems can be used to send huge sums of money, layered fraud protection is required across all products and channels used to manage real-time payments.

Authorized push payment fraud schemes come in a wide variety of forms. Here are a few examples of frequent attack types:

Attacks on individuals

• Paying an invoice that appears to be from their child’s school but is actually from a fraudster and is sent to the scammer’s bank account. 

• Sending money to a tradesperson who has been working on your houses, such as a carpenter or a builder, only to discover that you acted on the basis of an email from a fraudster posing as your legitimate contractor. 

• Scams that prey on people’s trust, such as romance scams or the famed ‘Hey Mum’ scam, in which people are duped into giving money to criminals with whom they believe they have a personal relationship.

Targeting property transactions

Any property acquisition, whether by an individual or a business, can be affected by this type of fraud. In fact, conveyancing solicitors could become victims of payment fraud as well. When criminals intercept the email chain between sellers, buyers, estate agents, and solicitors, property purchase fraud happen. 

Once the communications have been intercepted, the fraudsters alter the payment details associated with financial transfers, causing payments to be misdirected to the criminals’ accounts. Property transactions typically involve substantial quantities of money, and becoming a victim can be life-changing.

The Legislation Holdings 

The proposed policy was included in the financial services and markets bill on Tuesday, along with a promise to maintain access to cash withdrawals and deposits. 

“Scam victims currently face a lottery of reimbursement depending on which bank they bank with, so the regulator must now be ready to ensure firms treat their customers consistently and fairly, with tough enforcement for those who break the rules,” said Rocio Concha, director of policy and advocacy at consumer group. 

Which, after a spike in scams during the pandemic, the government committed in November to increase the powers of the Payment Systems Regulator (PSR), which establishes rules for banks and other payment service providers.

The majority of high-street banks have signed a voluntary code established in May 2019. While this enhanced compensation levels for victims, the government claimed that the way it was implemented was “inconsistent,” with banks endorsing the code and offering varying degrees of compensation. Since April 2019, TSB has promised duped consumers a guaranteed return. 

The financial services and markets bill, as per the government, will define the PSR’s powers to order banks to refund victims of authorized push payment (APP) fraud, in which fraudsters deceive people into sending money to an account that they control when they use particular payment systems. More than £355 million was lost to APP fraud in the first half of 2021. 

The bill also intends to boost the UK financial sector’s competitiveness post-Brexit by modernizing capital markets and encouraging more investment. It put out a commitment to guarantee the long-term sustainability of the country’s cash infrastructure as digital payments have become mainstream, and banks have eliminated branches.

“Access to cash for everyone, when they need it, is vital for communities,” said Duncan Cockburn, CEO of OneBanks, an open banking fintech that operates shared branch kiosks. The epidemic hastened a long-term fall in bank branch locations.

This year, about 200 closures have been announced out of a total network of less than 7,000. Cash continues to be an important mode of exchange, particularly in rural areas and among poorer populations.

According to a recent report by ATM network operator Link and the Royal Society of Arts, one in five adults in the UK stated they would struggle to manage in a cashless society. 

In December, the Post Office and major UK banks unveiled a new commitment to protect cash access through measures such as shared bank hubs. The announcement was welcomed by Natalie Ceeney, chair of the Cash Action Group, which led the testing of bank hubs in 2021.

“We can move the focus from whether we can protect cash to how we can effectively address the needs of those who need it with this law.”

Protect yourself and your loved ones by getting advice from The Global Payback. Visit our news page for more guidelines and updates.

Sources

• Author: Ruby Hinchliffe – https://www.retailbankerinternational.com/news/uk-financial-services-markets-bill/
• https://www.ftadviser.com/investments/2022/05/10/govt-to-force-banks-to-compensate-fraud-victims/