Fraud is the most common crime in England and Wales. Not only are payment service providers on the front line when it comes to preventing fraud, they are increasingly expected to step in so that victims of fraud get their money back.
Acting to slow the growth of fraud…
At the end of 2023 the FCA concluded its review of anti-fraud controls at payment service providers. In its report the FCA shares examples of good and poor practice. For example, the FCA believes that some firms can do more both to improve the support they offer fraud victims and to show that they are fully considering the characteristics of customer vulnerability when making decisions about fraud claims and complaints.
This year payment service providers should use the FCA’s findings to inform what more they can do to detect, manage and reduce fraud. This should be closely aligned to the firm’s implementation of the FCA’s Consumer Duty, i.e. the requirement to deliver good outcomes for retail customers.
…and footing the bill when it happens
The government’s Fraud Strategy plans to deliver a 10% cut in fraud by the end of this year. As well tackling the source of the crime, this strategy also includes plans for payment service providers to reimburse more victims, in particular those subject to authorised push payment fraud.
APP fraud involves the criminal tricking the victim into sending money directly to an account controlled by the fraudster. 97% of authorised push payment fraud happens over the Faster Payments system.
The Payment Systems Regulator is introducing a new reimbursement requirement for APP fraud within Faster Payments. Payment service providers must work through details of the new framework to ensure they have all the necessary processes and procedures in place.
According to the PSR, the UK is the first country in the world to implement consistent standards to reimburse victims of APP fraud. With the EU and other jurisdictions considering similar measures, it is unlikely to remain the only one.
Date for the diary: 7 October 2024 – the PSR’s reimbursement requirement comes into force.
This is the third in a series of five blogposts looking at the outlook for payments regulation in the EU and UK. Read the Fintech and Payments section of our Financial Regulation Legal Outlook 2024 for more.