Banks to Delay Suspicious Payments

Banks to Delay Suspicious Payments for Up to 72 Hours to Combat Fraud

In a significant move to strengthen fraud prevention, the UK government is set to introduce new legislation allowing banks to delay payments for up to 72 hours if they suspect fraudulent activity. This will give banks more time to investigate suspicious transactions, offering better protection for consumers from scams that cost an estimated £460 million in the last year alone.

Current Process vs New Rules

Currently, banks must either process or refuse a payment by the end of the next business day, leaving little time for in-depth investigations into potentially fraudulent transactions. The proposed changes aim to extend this time frame, allowing banks to hold payments for 72 hours when they have reasonable grounds to suspect fraud.

This extended period will enable financial institutions to assess the legitimacy of the transaction, offering a vital layer of protection against scams that target individuals and businesses alike.

Government's Commitment to Fight Fraud

Economic Secretary to the Treasury, Tulip Siddiq, emphasised the importance of this new measure, stating, "Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people. We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave."

Fraud is now the most prevalent form of crime in England and Wales, accounting for over a third of all reported crimes. Many of these are purchase scams or romance scams, where fraudsters trick victims into transferring large sums of money under false pretenses.

Consumer and Industry Response

This legislative change has been widely supported by consumer advocacy groups and the banking industry. Rocio Concha, Director of Policy and Advocacy at Which?, praised the initiative, stating that while it should not affect everyday payments, it gives banks the ability to delay transactions and protect customers from scams. She added that financial firms must use this power "in a careful and targeted way," and work closely with the police and other authorities to fight fraud.

The banking industry has also welcomed the move. Ben Donaldson, Managing Director of Economic Crime at UK Finance, said, “UK Finance has long called for firms to be allowed to delay payments in high-risk cases where fraud is suspected, and we are delighted to see proposed new laws supporting this." He highlighted the importance of giving banks the time to advise customers and prevent fraudsters from coercing them into making payments.

How Will the Delay Work?

When a bank delays a payment due to suspected fraud, they will be required to inform the customer of the reason for the delay and explain what steps the customer needs to take to unblock the payment. This will ensure that consumers are aware of the situation and can take the necessary steps to resolve it.

Additionally, to protect customers from unnecessary hardship, banks will be required to compensate them for any interest or late payment fees they incur due to the delayed payment.

A Careful Balance

While this new measure is a major step in combating fraud, it's important to ensure that it is applied carefully. Legitimate payments should not face undue delays, and the process must be transparent to prevent unnecessary frustration for customers. By requiring evidence to trigger a delay, the new system will focus on truly suspicious transactions while allowing everyday payments to proceed as normal.

This move marks a crucial step towards a more secure financial system, giving both banks and consumers the tools to fight back against the rising tide of fraud.