UK MPs call for sanctions and payment delays to combat fraud

UK MPs call for sanctions on banks failing to meet deadline for new account check rule and to implement 24-hour delay on payments to help combat fraud.

The Treasury Committee released the unanimously agreed report on Economic Crime: Consumer View.

According to the committee, more than £600m was stolen from consumers in the just the first half of 2019.

One method to combat fraud is Confirmation of Payee, which will require firms to cross-reference payee names with account numbers and sort codes. If a financial firm cannot introduce this method by March 2020, the committee believes regulators should consider sanctions on them.

Another potential method of combatting fraud would be to implement a 24-hour delay on all initial payments between accounts, giving consumers time to consider if they have been defrauded, the group stated.

There are two key types of fraud in the UK, according to the committee. The first is authorised push payments (APP), where the genuine customer processes a payment to another account whilst its controlled by a criminal.

The next fraud type is unauthorised fraud where an account holder does not provide authorisation and instead the transaction is carried out by a third-party.

Currently, when a payment is sent, the initiator of the payment must give the payee’s name, account number and sort code. The account number and sort code are then cross-referenced by the receiving bank.

Under Confirmation of Payee, which is set for a March 2020 implementation date, it will require the payee name to also be checked. In the report, the committee said, “It’s a serious failure that banks weren’t already doing this. The regulators should consider sanctioning any firm that misses the March 2020 deadline.”

The Contingent Reimbursement Model (CRM) is a voluntary financial services industry code which dictates best practices for reimbursing money lost to consumers through app fraud. In the document, it states this should become mandatory in legislation, as many banks fail to reimburse customers.

Another recommendation from the Treasury Committee involved fast payments which process money within seconds. This enables fraudsters to quickly to move money. The committee suggests there should be a 24-hour delay on all first-time payments to ensure time to cancel it if it’s fraudulent. After the first payment, the transactions could be completed at the normal speed.

Other suggestions to combat fraud include educational campaigns to warn students of money mule scams and that all instances of fraud within a bank should be reported.

Commenting on the Report, Rushanara Ali MP, the Treasury Committee’s lead member for this inquiry, said, “With scams getting ever-more sophisticated, it’s clear that economic crime is a serious and growing problem in the UK.

“The Treasury Committee’s report examines the scale of economic crime faced by consumers, ways that financial firms are combatting economic crime, how economic crime is investigated, and consumer’s rights and responsibilities.

“To ensure that consumers are protected, it should now be compulsory for financial firms to reimburse money lost to victims of Authorised Push Payment fraud, and they should consider doing so retrospectively.

“There should also be a mandatory 24-hour delay on all first-time payments, allowing consumers time to consider the risk that they are being defrauded. The Government and regulators should take on board all of the Committee’s recommendations to enhance consumer protection in the face of this harmful tide of criminal activity.”

Copyright © 2019 FinTech Global

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