The Payment Systems Regulator issued Specific Requirement 1 on the Faster Payments Scheme Operator (Pay.UK) to insert APP scam reimbursement into Faster Payments. The timetable as follows:
Action
Financial Service & Market Act 2023 (FSMA) – places statutory on PSR for APP scam payments over Faster Payments by 29-Feb-24
Faster Payments Scheme Operator (Pay.UK) to change the rules by 07-Jun-24
implement rules by 07-Oct-24
Flow of Money
The steps in the flow of money between the consumer, the Payer Bank and the Receiving Bank are:
Timeframes
Consumers notify their bank as soon as a scam has happened but no later then 13 months
The Payer Bank reimburses the victim 5 Business Days or “stops the clock” for a maximum 35 Business Days
The Payer Bank sends the Payee Bank for reimbursement when paid out 1 day after reimbursement
Payee Bank (Receiving PSP) may deduct 50% of the maximum claim excess amount from specific amount and pays within reasonable timeframes
PSR sets the maximum claim excess value £415,000 less £100 excess
The Winners are:
Consumers or SMEs victims affected by APP scams. Large corporate market is not covered. The belief is they are responsible for their own fraud prevention.
Payer Banks that exceed 50% reimbursing their clients today as they will be receiving money from the beneficial bank for up to 50% of the scammed amount.
Financial Service Ombudsman as the banks now know what has to be reimbursed and can refrain from “blaming their customers”. Currently only 40% of all scams are being compensated.
The Losers are:
Scammers as the Banking Industry will protect their customers more thoroughly and consistently with regulation designed to curtail APP fraud. That said: we need to be vigilant and share data and information.
Banks who reimburse less than 50% currently, 95% of the 300 UK Banks as only 10 banks have joined the CMR voluntary reimbursement program. This is being addressed by mandatory use of Confirmation of Payee (CoP) in 2024.
Better Governance
As Pay.UK is the operator they will be able to see which banks are supporting Mule Bank Accounts by analysing the 50% reimbursements to the Payer banks. The trend for scammers and their mule network is to open bank accounts that do not offer CoP. Like the calculation before multilateral cash flows netting, the banks sending the most money back to the Payee Banks can be highlighted. This in turn can be flagged to the FCA to ensure the Know Your Customer (KYC) procedures being used are fit for purpose.
The first step is a call to action by the banks to make the PSR timeframes.
Another is for those banks with large corporates as customers to see how they can offer better protection against corporate APP scams. The large corporates tend to make more international payments than consumers. International payments are going to become instant as EU is passing regulation in 2024 and the US is trialling FedNow making faster payments available for all. The economic benefits, a rise in 1 to 2% of a Country’s GNP by countries installing instant payments is too go to miss.
The UK was one of the first to install faster payments in 2008. In 2024 it will be one of the first to introduce regulatory compliance over faster payments systems for reimbursement to the victims of scammers. In a bygone era, Winston Churchill would have said – “it makes you proud to be British.”
The most pertinent point here is to act now and prevent sooner, don’t wait or leave it until the final deadline. If you need help to implement CoP or just to understand more about the options, reach out to us for free impartial information.
John Bertrand Andy Coleyshaw Bob Ford
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- Source: https://www.finextra.com/blogposting/25435/reimbursement-of-app-scams-boost-for-consumerssmes?utm_medium=rssfinextra&utm_source=finextrablogs
