UK Banks Allowed To Delay Anti-Fraud Payment Safeguards

Law360, London (March 23, 2020, 2:46 PM GMT) -- Britain’s payments watchdog has said that it will not penalize banks that are slow to introduce measures aimed at protecting customers from sending their money to scammers as lenders focus their operations on controlling the coronavirus crisis.

The Payment Systems Regulator said that it will allow banks to delay implementing rules that force them to check whether the name a customer enters when making a payment matches the account details that the money is being sent to.

The measure, known as confirmation of payee, or CoP, was due to be introduced at the end of March. But the PSR said Friday that it will not take action against lenders who delay implementing the rules before June 30 given the global COVID-19 pandemic.

“We have been very clear that where the directed banks provide appropriate protection to people, we will not take any formal action in respect of delays to the introduction,” the payments regulator said in a statement. “We fully expect the banks to do everything they can to protect people in the meantime and implement CoP as soon as possible.”

The rules, which must be implemented by the U.K.’s biggest banks including HSBC, RBS and Lloyd’s, come in response to a rise in authorized push-payment fraud, in which banking customers are tricked into sending their money to criminals.

Consumer group Which? has said that the scam has risen rapidly since 2017, with consumers losing an estimated £97 million ($111 million) during the first three months of 2020 alone. The group also said that a third of the £1 billion that customers have lost in total since 2017, or £320 million, could have been prevented if a simple system of checking names on bank transfers had been in place.

Under existing rules, banks have to cross-check the account details a sender enters to ensure they are matched with an account, but they do not have to check whether the names match.

The PSR said Friday that banks that choose to delay their introduction of the rules must still ensure that customers who would have benefited from the protections are not disadvantaged. This includes refunding fraud victims if the confirmation of payee rules would have prevented it from happening.

Banks have been supportive of the confirmation of payee rules. But they have also called for exemptions to the rule where it is not reasonable or proportionate.

--Editing by Tom Mudd.

For a reprint of this article, please contact reprints@law360.com.

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