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Banks will have more time to investigate potentially fraudulent payments under anti-scam legislation to be published by the British government on Wednesday.
Banks currently have to process payments by the end of the next business day in most cases even if they suspect wrongdoing, which limits their ability to block transactions involving fraudsters.
The Government’s bill, which ministers aim to turn into law by October 7, will allow banks and payment groups to delay processing transactions for a further 72 hours if they have reasonable grounds to suspect fraud or dishonesty.
The extra time would make it easier for banks to contact customers, police and other interested parties in relation to suspicious payments.
The legislation is designed to crack down on “authorized push payment fraud,” where a customer is tricked into initiating and authorizing a transaction.
This is often done by scammers who trick a customer into paying for goods that never arrive, or by scammers who pose as bank staff and convince the victim to transfer money.
It can also take the form of “romantic fraud,” in which a scammer tricks the victim into developing a romantic attachment to him or her.
Victims lost around £485 million to authorized push payment fraud in 2022, according to the Government.
“Scammers spin whole webs of lies and fabricate all sorts of things to get people to send them money,” city minister Bim Afolami said.
“This legislation will give banks, other payment service providers and law enforcement more time to get in touch with victims and break the scammer’s spell before the money is sent,” he said, adding that the government recognized “the impact of this devastating crime on victims”. ”.
The extended timeline for banks to delay payments will put new focus on financial institutions’ IT systems because technology that falsely flags legitimate transactions as suspicious could lead to days-long delays in customer money transfers.
The Financial Conduct Authority, the regulator for the City of London, warned last year that some payment groups were “freezing a disproportionate number of accounts, for too long and without adequate explanation”.
The planned legislation was welcomed by banking trade association UK Finance, which said the rules “could give payment service providers time to connect with customers and provide them with the advice and support they need.” they need to avoid being coerced by criminals who want to steal their money.” money”.
Afolami is expected to announce the legislation at a global fraud summit in London, hosted by the UK.