Banks to begin checking names on bank transfers to prevent fraud
Currently, lenders only check the account number and sort code on transfers
Banks will begin checking that names on transfers match the account and warn customers if their is a discrepancy, in a move designed to stop fraud.
Currently, lenders only check the account number and sort code for bank transfers, making it easier for fraudsters to convince customers to transfer money by saying the account belongs to a trustworthy company.
Banks have been accused of dragging their feet on the change, which consumer groups say is relatively simple to implement.
The "confirmation of payee" system should be rolled out in 2019 and is designed to help combat a rise in so-called advanced push payment (APP) fraud.
In this type of scam, consumers are convinced to transfer money, unaware that the destination account belongs to a fraudster.
APP fraud cost UK consumers £145m in the first half of 2018 - money which they may not be compensated for because they authorised the payment.
Under the new system, when someone is setting up a new payment, their bank will notify them whether or not the name matches that of the account owner.
If the name doesn't match, it is up to the sender to decide whether or not to proceed with the payment. The risks will be made clear to them beforehand.
Gareth Shaw, Which? money expert welcomed the change but questioned why banks have "dragged their heels and not implemented this system years ago".
He added: “With losses to bank transfer fraud increasing drastically it's clear this measure can't come in soon enough.
“While we await its introduction, it's crucial that an agreement is reached on the funding mechanism to reimburse all victims of bank transfer fraud who have been left out of pocket through no fault of their own.”
Alongside these changes, a new industry code is being developed which could help victims of APP fraud get their money back.
Customers were scammed out of £503.4m between January and June, according to the finance industry’s own research, published last month.
Favoured methods include duping victims into paying in advance for a product or service that doesn’t exist or impersonating a trusted organisation such as the police, UK Finance found.
Sums involved can be significant, with an average loss in a police and bank impersonation scam of £11,402. This is known as authorised fraud because the victim has mistakenly given permission for the transfer.
Paul Horlock, chief executive of payments regulator Pay.UK, said: “Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong postcode.
“Even if you have used the correct name it won't reach the intended destination - and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account."
Someone who makes a payment despite being told the name does not match may risk not being judged not to have taken due care - potentially making it more likely they will never see their money again.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies