Next month, protection for consumers who fall victim of APP Fraud, will be greatly improved.
From 7th October, payment service providers (PSPs) and banks that transact using the Faster Payments Scheme, will be obligated to reimburse money lost to fraudsters, as mandatory reimbursement rules from the Payment Systems Regulator (PSR) come into effect.
According to the PSR, APP (Authorised Push Payment) scams occur when someone is tricked into sending money to a fraudster who is posing as a genuine payee. Every year thousands of businesses and individuals fall victim to these scams. The latest figures show that in 2023, £459.7million was lost to APP scams (according to UK Finance).
The PSR wants to see more action from financial institutions to try to prevent APP scams from taking place and also to protect businesses and individuals should they fall victim.
“APP Fraud reimbursement rules are being implemented now due to the sharp rise in fraud cases, the digital transformation of payment systems, and the need to address gaps in existing consumer protections. The increasing sophistication of fraud schemes and the growing demand for corporate accountability have made stronger legal measures essential to protect consumers and foster trust in the financial system,” said Warren Sanders, Director of international payment solutions and multi-currency account management services firm EWG.
“The push for APP Fraud legislation has been going on for around eight years – the catalyst being the 2016 Which? super-complaint - voluntary codes were then established, followed by growing calls for mandatory protections, and finally legislative action in2022–2023 to create binding requirements.,” added Warren.
APP scams come in various guises. One type of scam is the ‘malicious payee’, when someone is tricked into purchasing goods which don’t exist or are never sent. ‘Malicious redirection’, is when a fraudster, claiming to be from that person’s bank, gets someone to transfer funds out of their bank account and into that of the fraudster.
“Whilst we have a whole raft of measures in place to help protect our clients, these new rules do add an extra layer of protection – but they’re not failsafe,” added Warren. “Although consumers will be entitled to reimbursement from their payment provider, should their claim meet the criteria, the fight against APP Fraud must be multi-faceted. While legislation like the Contingent Reimbursement Model Code (CRM Code)is essential for protecting consumers, banks must also invest in better technology, and governments need to promote public awareness and international cooperation. Ultimately, strong protections are a positive step, but prevention, education, and collaboration will be the most effective way to reduce the overall risk of fraud in the long term.”
The enactment of these new rules should serve as a reminder to all that consumers and businesses, need to take a more active role in preventing fraud and following best practices outlined by their banks.
By adapting to these requirements, clients can better protect themselves from fraud and ensure that they are eligible for reimbursement if they become victims
Most APP Fraud will be reimbursed within five business days and additional protections offered for vulnerable customers while claims can be made up to 13 months following the fraud. Sending PSPs must notify the receiving PSPs of APP scams within a specific timeframe – an additional measure to improve communication between financial institutions regarding live frauds.
For more information visit the PSR’s website: https://www.psr.org.uk/our-work/app-scams/
