The government has published draft legislation that will allow banks and payments firms more time to investigate fraud.
Under the “near-final” legislation, expected to come into law on 7 October, payment services providers will be able to delay an outbound payment by up to four business days from the time the order is received.
HM Treasury said that this method would only be permitted where there are "reasonable grounds" to suspect the transaction is fraudulent, with those grounds being established no later than the end of the next business day following receipt of the order.
The delay may also only be used where the bank or payment firm requires further time to contact the customer or a third party, such as law enforcement, to establish whether to allow the payment.
Economic secretary Bim Afolami said that the move would help “break the spell” of fraudsters, adding that the new law would mark an important step in the fight against fraud.
The government first outlined its fraud strategy in May last year, when it pledged to investigate how the law may need to be adapted to allow payment services further time to assess potential fraud.
The draft legislation comes after research from UK Finance found that the nation saw authorised push payment (APP) fraud losses reach £239.3 million in the first six months of 2023.
The trade association says that APP fraud losses continue to be driven by the abuse of online platforms and telecoms, with criminals committing investment scams advertised on search engines and social media, romance scams via online dating platforms, and purchase scams promoted through social media and auction websites.
The government's fraud strategy also included the introduction of the Payment Systems Regulator's mandatory APP reimbursement scheme, which coincides with the launch of the legislation on 7 October.
The UK payments watchdog recently said that the maximum level of reimbursement per claim will be set at £415,000 and will apply to all consumers.
Additionally, it revealed that sending payment firms can apply a claim excess of no more than £100 if they choose to.
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