The government is giving banks new powers to combat fraud, allowing them to hit the pause button on suspicious payments for an additional 72 hours. Currently, bank transfers have to be processed by the end of the next business day, meaning the new rules will take the maximum delay to four days in total.
Scammers have become increasingly sophisticated in recent years, with some fraud victims losing out on eye-watering sums as a result. Fraudsters stole £3.2 million a day in 2023, according to a report from trade body UK Finance.
“Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people,” says Tulip Siddiq, economic secretary to the Treasury. “We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave.”
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The government says over a third of all crimes committed in England and Wales are related to fraud, making it the most common form of crime committed in the country. Common scams include phishing (when fraudsters trick you into providing personal information), romance scams, investment scams, pension scams, ticket scams and trusted organisation scams.
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Ben Donaldson, managing director of economic crime at UK Finance, says the new rules will give payment service providers time to “get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money”.
The new rules should work in consumers’ favour, and banks will need to have reasonable grounds to suspect a payment is fraudulent before triggering a delay. They will need to inform the customer and explain what they need to do to unblock the payment. Banks will also have to compensate customers for any interest or late payment fees they incur as a result.
Ramping up fraud protection
The new powers announced by the government today (3 October) are part of a broader effort from legislators and regulators to ramp up fraud prevention. Just last week, the Payment Services Regulator (PSR) also confirmed new protections for victims of authorised push payment (APP) fraud.
APP fraud is one of the most common types of scam. It involves an account holder being tricked into sending money to a fraudster posing as a genuine payee. The latest figures from UK Finance show £459.7 million was lost to APP scams in 2023.
Under current rules, banks can choose whether to refund victims based on how much attention they paid to warnings. However, from 7 October, banks will be required to refund APP fraud victims for losses of up to £85,000. The refund must be processed within five days.
The new protections introduced by the PSR bring compensation in line with that offered by the Financial Services Compensation Scheme. The reimbursement limit is less than the £415,000 previously suggested, but the PSR says over 99% of APP claims will be covered by the reimbursement cap.
How to protect yourself from scammers
The effects of fraud can be devastating and have long-term implications, both financial and psychological. Unfortunately, scams are on the rise with technology making it easier than ever for fraudsters to target victims using tools like social media and artificial intelligence.
WhatsApp scams are also becoming increasingly common. Earlier this year, a WhatsApp group claiming to be run by star fund manager Nick Train tried to con investors using impersonation tactics.
To help reduce the risk of becoming a victim, UK Finance recommends “taking five" to stop fraud. The trade body says only criminals will try to rush or panic you, meaning it is important to do your research and take your time before acting. You should also be suspicious of anything that sounds too good to be true.
“Remember, your bank or the police will never ask you to transfer money to a safe account,” the organisation adds. “If you’re unsure or are suspicious then talk to a trusted friend or family member before making your payment.”
