The UK Payment Systems Regulator (PSR) has announced fresh efforts to tackle the menace of authorised push payment (APP) fraud, which affects not just individual consumers, but companies of all sizes, too.
In this low-tech form of financial crime, victims are typically duped into authorising electronic payments to malicious parties, on the false pretext that the monies will be heading to known, legitimate payees.
In September last year, consumer group Which? lodged a mammoth ‘super-complaint’ on APP fraud with the PSR, highlighting the damaging effects of such scams and citing a series of painful case studies.
As The Treasurer reported, the PSR responded three months later with an action plan, urging the banking industry to confront the issue.
Under that plan, banks were required to:
Which? gave the action plan a withering reception, arguing that the PSR had failed to address banks’ liability on the matter and had therefore “let them off the hook”.
However, it has now emerged that the PSR is prepared to do more to help restore victims’ funds, with the emphasis much more on the responsibilities of payment service providers (PSPs) and banks to act in the aftermath of APP stings.
In a new report, the watchdog proposes the introduction of a ‘contingent reimbursement model’ across the UK to help resolve scams.
“We believe more can be done in the area of reimbursement,” the report notes, “and so does the industry: Financial Fraud Action UK (now integrated into UK Finance) proposed the concept of a model that sets out the circumstances when PSPs would be responsible for reimbursing APP scam victims that have acted appropriately.”
Depending on the circumstances, it said, “this could be the victim’s PSP, or the PSP that received the money on behalf of the fraudster.”
The PSR revealed that it had worked closely with the Financial Conduct Authority (FCA) on developing the scheme, with the UK Finance recommendations firmly in mind.
It said: “The FCA has reviewed the way banks handle APP scams. It found banks’ procedures were inconsistent, their existing fraud-detection systems could not easily detect APP scams, and they didn’t collect enough data.”
The PSR added: “Reimbursement would depend on whether the banks and payment organisations had met required standards – such as measures and processes that help prevent and respond to scams – and whether the victim had also taken an appropriate level of care in protecting themselves.”
Under the PSR’s plans, banks and PSPs should have the reimbursement framework in place by September 2018.
PSR managing director Hannah Nixon said: “To be successful, the model must be pragmatic: consumers will need to be vigilant and protect themselves, but equally we expect banks and PSPs to uphold best practice – and when they don’t, there should be reimbursement.”
The PSR is currently consulting on the planned reimbursement model. To find out how to provide feedback, read the organisation’s full report here.