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authorised push payment

Understanding the Authorised Push Payment (APP) fraud threat

In today’s digital age, where electronic transactions have become commonplace, the spectre of fraud continuously looms large. One such deceptive practice that has been increasingly plaguing the UK’s financial landscape is Authorised Push Payment (APP) fraud.

At its core, APP fraud involves a fraudster deceiving individuals into sending them money. These payments are ‘authorised’ because the individual unknowingly gives consent, believing they’re making a legitimate transaction. The scammer often masquerades as a trusted figure or institution, such as a bank representative, solicitor, or even a family member, thereby manipulating the victim into transferring funds directly to a bank account controlled by the fraudster.

There are various ways in which APP fraud can manifest:

  1. Purchase Scams: A victim pays in advance for goods or services that don’t exist, usually facilitated through online marketplaces.
  2. Advance Fee Scams: A victim is convinced to pay a fee, believing they’ll receive a larger amount of money in return, but they never do.
  3. CEO Fraud: Impersonation of a senior executive or a trusted supplier, asking for an urgent fund transfer.

The consequences of APP fraud extend beyond financial losses. For many victims, especially those who lose significant sums, the emotional and psychological toll can be profound.

Combatting APP fraud requires collective vigilance. Banks and financial institutions in the UK have started to adopt more robust verification processes for new payee registrations, sending warning messages about potential scams, and offering better education for customers about these types of fraud.

The UK’s Payment Systems Regulator has also been pushing for more protections for victims, including potential reimbursement if they’ve taken reasonable care.

For individuals, it’s essential to remain sceptical of unsolicited requests for money, even if they appear to come from trusted sources. Always double-check payment details directly with the institution or individual in question, using contact details you’ve sourced independently.

In conclusion, while the digitisation of banking has offered unprecedented convenience, it also presents new avenues for deception. Awareness and education about APP fraud, combined with rigorous verification procedures, are our best defence against these malicious schemes.

Image by vicky gharat from Pixabay

PSR proposes £415,000 cap on APP fraud claims

The Payment Systems Regulator (PSR) has launched two consultations in the lead up to the implementation of its new authorised push payment (APP) fraud reimbursement requirements.

In June, the PSR set out its final position on tackling APP fraud, which will mean the vast majority of victims will be reimbursed within five days of the fraud being reported to their bank.

The PSR’s reimbursement requirements will ensure action is taken across the payments ecosystem to prevent APP fraud from happening in the first place, but also encourage, and reinforce the importance of, consumers remaining cautious when making payments.

Before the new requirements come into force next year, the PSR said it would seek views on the maximum level of reimbursement and claim excess, as well as on the consumer standard of caution.

In this consultation, the PSR outlines its proposed approach to the consumer standard of caution. The PSR proposes that the standard should consist of three things:

  • A requirement for consumers to have regard to specific, directed warnings given by their bank, which make clear the intended recipient is likely to be a fraudster. Although banks will need to take into consideration the complexity of an APP scam, including any social engineering consumers may have faced.
  • A prompt reporting requirement where consumers who are, or suspect they are, a victim of an APP scam should notify their bank promptly and, in any event, not more than 13 months after the last fraudulent payment was made.
  • An information sharing requirement where consumers should respond to any reasonable and proportionate requests for information made by their bank to help them assess a reimbursement claim, or to determine if a consumer is vulnerable.

If it can be demonstrated that the consumer has been grossly negligent in not meeting one of more of these requirements, then they may not be reimbursed.

However, gross negligence is a very high bar which will critically depend on the individual circumstances of each case. The PSR only expects it to apply in a small minority of cases. Gross negligence will never apply where a victim’s vulnerability is a factor in them being defrauded.

In June, the PSR confirmed that sending banks will have the option to apply a claim excess under the new reimbursement requirements, except in cases where the consumer is vulnerable. The regulator stipulated there will be no minimum threshold for claims, but there will be a maximum limit.

The PSR is now seeking views on the most appropriate way of structuring a claim excess. This includes whether an excess should be a fixed amount (similar to an insurance claim excess) or a percentage of the reimbursement claim amount.

The PSR also proposes that the maximum reimbursement level should be in line with the prevailing Financial Ombudsman Service limit of £415,000 per claim – which around 99.98% of APP fraud falls within. The regulator is also consulting on whether the maximum level will apply to vulnerable consumers.

Chris Hemsley, Managing Director at the PSR, said: “The changes we are delivering will bring a major shift in preventing fraud, increasing reimbursement for victims, and incentivising the banks to do more to help their customers. The two aspects we’re consulting on now will help to strike the right balance between encouraging people to be careful when making payments, while ensuring they have confidence in knowing they’ll be better protected if they do fall victim to fraud.”

Image by PublicDomainPictures from Pixabay