Upcoming legislation in the UK empowers banks to freeze large payments for fraud detection.
- Starting October, banks can hold payments for up to four days if fraud is suspected.
- The measure extends current 24-hour limits, aiming to protect consumers from scams.
- These changes align with new rules requiring reimbursement for APP fraud victims.
- Legal experts express concerns over potential disruptions due to increased measures.
New legislative measures in the UK will soon allow banks to freeze large payments for up to four days if there are reasonable suspicions of fraud. This marks a significant extension from the current 24-hour limit and is part of broader efforts to enhance fraud prevention strategies.
From October, these changes will coincide with the implementation of a new regime mandating banks to reimburse almost all victims of Authorised Push Payment (APP) fraud. APP fraud, which encompasses scams such as romance scams and fake purchase schemes, accounted for losses of £460 million to consumers last year.
The extended freeze period allows for thorough investigations when suspecting transactions that do not align with a customer’s usual financial behaviour. The British Treasury has characterised these rules as an additional tool in combating fraud, with Labour supporting the Conservative-initiated legislation.
Bim Afolami, a former city minister, endorsed these powers, stating they are “another weapon in our arsenal to tackle fraud.” Despite this, some legal experts, such as Gareth Richards from the Society of Licensed Conveyancers, have voiced concerns that these measures could introduce bureaucratic hurdles, potentially disrupting transactions, particularly in the property sector.
Under the new Payment Systems Regulator guidelines, victims of APP fraud will be eligible for reimbursement unless they ignored bank warnings, delayed notifications, refused to share fraud details with necessary parties, or exhibited gross negligence. Vulnerable customers will receive additional safeguards, further complicating banks’ abilities to deny refunds.
The reforms also set a maximum liability for banks at £415,000 per case of APP fraud. Over 480 businesses have already registered with Pay.UK to partake in the scheme. This initiative will initially be funded by a levy on Faster Payments transactions, underscoring the financial industry’s commitment to addressing fraudulent activities.
These legislative changes represent a significant step forward in securing the financial transactions of UK consumers against prevalent scams.
