U.K. Regulator Addresses Banks Not Reimbursing Fraud Victims

Apr 12, 2021

Authorised Push Payment (APP) Scams occur when an individual or a business is deceived into sending money directly to a fraudster impersonating a legitimate payee. The results are disastrous for those ingenious people who fall prey to them.

Based on findings by UK Finance, it found a total of 66, 247 cases of APP fraud reported in the first part of 2020. The losses totaled £207.8 million.

APP scams rank second in the biggest type of payment fraud, both in the value of the losses and the volume of scams. There are a total of eight variations of APP scams and they typically fall into two categories:

  • Malicious Payee: This is when someone deceives a customer into purchasing items that don’t actually exist, or the customer simply never received the items purchased. 
  • Malicious Redirection: An example can be when a fraudster poses as a bank employee and tries to trick a customer into transferring funds out of their bank account and into the fraudsters. 

How PSR Has Fought Back

Payment Systems Regulator or (PSR) was launched in the U.K. in order to ensure that all payment systems are developed and operated in a fashion that advocates the interests of both businesses and consumers utilizing these systems. 

In order to address the concerning volume of fraud due to APP scams, in 2018, PSR gathered both consumer and industry representatives to develop an industry code called the CRM Code. It was finalized in May 2019.

The role of the CRM Code is to diminish the prevalence and impact of APP scams. It was created to boost consumer confidence so that, if they were to fall victim to such fraud and have taken the necessary steps, they will receive reimbursement. 

It also lays out the standards for Payment Service Providers or (PSPs), this includes the biggest banks throughout the U.K. and customers covered by the code which include consumers, micro-businesses, and small charities. 

The Lending Standards Board (LSB) governs the Code and its members. PSR oversees the operations of the Code and the effect it has on the number of APP scams. 

Implementation Of Confirmation Of Payee

Confirmation of Payee or (CoP) is a new fraud prevention tool that takes care of most Faster Payments and CHAPS transactions. Back in August 2019, PSR gave members of the U.K.’s largest banks a specific instruction to apply CoP by the end of March 2020. By July 2020, certain PSPs had accomplished widespread implementation of CoP. This was a major breakthrough in tackling APP scams. 

PSR has confirmed that their work won’t end there. They want to continue to extend CoP. They are actively encouraging all PSPs, regardless of size, to adopt CoP. 

By using CoP, banks are able to verify the name on the new payee’s account, in addition to the sort code, and the account number. If customers are setting up a new payee account, they have the ability to confirm that the name they entered matches the name on the account they plan to pay with. This will ensure that payments will not be routed to the erroneous account. 

By Working Together, APP Scams Could Be A Thing Of The Past

PSR is working tirelessly to ensure that fraudsters have a difficult time carrying out their deceitful tactics and protecting consumers before they strike. 

With the use of these aforementioned tactics and partnerships with other key players, they hope to significantly reduce the incidence of fraud

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