The news: The Financial Services and Markets Bill, announced in the Queen’s Speech, aims to safeguard access to cash and also protect victims of authorized push payment (APP) fraud in the UK.
More on the bill: The bill is part of a wider plan to maintain and enhance the UK’s position as a global leader in financial services. The bill will:
Though the bill has not yet been formally introduced, if it passes, it will address the growing fraud threat in the country.
What is APP fraud? APP fraud occurs when a criminal tricks a customer into authorizing a payment from their bank account to an account the criminal controls. Typically, the criminal spends days or weeks building trust with their victim, then disappears once the money is in their possession.
Banks’ legal responsibilities for fraud: Currently, banks are held to the Quincecare duty, which means they must use reasonable care and skill in executing customer orders and refrain from executing orders if they have reasonable grounds to suspect that the order is an attempt to misappropriate funds.
The hold-up is that, in most cases of APP fraud, orders come directly from customers who believe the transactions are being made in good faith. After the scam is complete, it’s hard to place the blame.
What else can banks do? In the UK, the Lending Standards Board (LSB) set forth voluntary practices that nine of the largest UK financial institutions follow. Recently, the LSB updated some of its practices to protect customers from fraud.
The big takeaway: Details on the new UK bill haven’t yet been released, and so it’s yet to be seen how the bill will impact banks. And the application of the Quincecare duty to APP fraud is still unclear. For example, a woman in the UK sued her bank when it allowed her to authorize a £700,000 ($963,000) payment from her account to a fraudster’s account in the United Arab Emirates.
As technology continues to transform the banking industry, fraudsters are finding new ways to infiltrate banks, either directly or through the social engineering of their customers.