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Authorised Push Payment Fraud

Volume 747: debated on Tuesday 12 March 2024

The Government take the issue of fraud very seriously and are dedicated to protecting the public from this devastating crime. According to UK Finance, in the first half of 2023 alone there were 116,324 cases of authorised push payment (APP) fraud, where a payer is deceived or defrauded into authorising a payment to a criminal.

To help combat fraud, the Government are working with industry to remove the vulnerabilities that fraudsters exploit; with intelligence agencies to shut down fraudulent infrastructure; with law enforcement to identify and bring the most harmful offenders to justice; and with all partners to ensure that the public have the advice and support they need.

Today, the Government have published draft legislation setting out their approach to allowing payment service providers to delay the processing of authorised push payments executed within the UK in sterling in circumstances where it appears there has been fraud or dishonesty. This fulfils a commitment in our ambitious fraud strategy to investigate this issue.

Currently, for most transactions, the Payment Services Regulations 2017 require that an outbound payment is processed by the end of the business day following the time of receipt of the payment order. The draft statutory instrument published today sets out that the Government intend to allow payment service providers to delay the processing of in-scope payments by up to four business days from the time of receiving the payment order. This will only be permissible where there are reasonable grounds to suspect a payment order from a payer has been placed subsequent to fraud or dishonesty perpetrated by someone else—excluding the payer—and those grounds are established by no later than the end of the next business day following receipt of the payment order. The delay may only be used where the provider requires further time to contact the customer or a third party, such as law enforcement, to establish whether to execute the payment.

Payment service providers will be required to inform customers of any delays, the reasons behind their decision to delay the payment, and what information or actions are needed to help the payment service provider decide whether to execute the order. However, this will not be required when doing so would be unlawful—for example, when doing so will contravene obligations under anti-money laundering or economic crime law.

The thresholds for any delay will ensure that payment service providers must have an evidential basis to delay a payment, while ensuring that suspicious payments are properly investigated and rejected as required. To help ensure that consumers and businesses do not incur any costs as a result of any delays to their payments, payment service providers will be liable for any interest or charges incurred by the payer resulting from a delay.

This measure applies only to authorised push payments executed within the UK in sterling. Small, medium and large businesses, which may have numerous obligations to make timely payments to suppliers, will be able to opt out of these provisions with the mutual agreement of their payment service provider.

To monitor the impact of this legislation and ensure it is used in a proportionate manner, the FCA will engage with payment service providers over reporting requirements in respect of compliance with the new provisions.

This legislation does not make any changes to the Payment Services Regulations 2017 with regard to inbound payments, whereby a payment service provider receives a payment from another payment service provider. This is because there are already obligations under financial crime legislation for payment service providers to delay inbound payments in certain circumstances. Therefore, the Government consider that legislative change for inbound payments is not required.

The Government welcome feedback on the drafting of this statutory instrument by 12 April 2024 and will engage with the financial services industry on this. The Government will then lay these regulations before Parliament in summer 2024. It is intended that these regulations will come into force by 7 October 2024 to align with the Payment Systems Regulator’s timelines for the introduction of mandatory reimbursement for APP scams.

The draft legislation and an accompanying policy note can be found at the below link