Bank transfers could take up to four days in fraud crackdown

The draft legislation will aim to fight criminals who exploit elderly and vulnerable people

Currently banks are given 24 hours to process payments, but will be given an additional 72 hours to investigate any potential fraudulent behaviour when money is being transferred. (Dominic Lipinski/PA) (PA Archive)

Bank transfers could take as long as four days as part of fresh legislation to combat fraud that was published on Tuesday.

Currently banks are given 24 hours to process payments, but they will be given an additional 72 hours to investigate any potential fraudulent behaviour when money is being transferred.

The draft legislation will aim to fight criminals who exploit elderly and vulnerable people and get them to send them large sums of money through bank transfers, known as authorised push payments (APPs).

Push payment fraud has increased significantly over the past few years with victims losing £485million to the scams in 2022, according to government figures.

The deception can involve fraudsters posing as romantic partners, family members, friends or other financial institutions such as banks, to convince people to send them substantial sums of money.

Under the legislation banks will be granted more time to contact customers, the police and other agencies to investigate if the payments are fraudulent.

Economic secretary to the Treasury Bim Afolami, said: “Fraudsters spin whole webs of lies and fabricate all sorts of things to convince people to send them money - this legislation will give banks, other payment service providers and law enforcement more time to get in touch with victims and break the fraudster’s spell before money is sent.

“The government is absolutely committed to tackling fraud and recognises the impact of this devastating crime on victims - this legislation is another tool in our arsenal to fight fraud.”

The government intends to lay the legislation before Parliament so that it comes into force by October 7 - when new consumer protections against APP fraud will come into force.

In December 2023, the Payment Systems Regulator (PSR) outlined new consumer protections against APP fraud, which will come into force from October 7 this year.

At present, many banks have signed up to a voluntary reimbursement code, but there have been concerns that this has been applied inconsistently - meaning the chances of getting a refund may, to an extent, depend on who someone banks with.

The regulator said its new reimbursement requirement will prompt a step-change in fraud prevention and see the vast majority of money lost to APP frauds reimbursed to victims.

Its policy statement confirmed that the maximum level of reimbursement per claim will be set at £415,000. A claim excess of no more than £100 may be applied.

The £415,000 limit is in line with the maximum award the Financial Ombudsman Service (FOS) can make when considering complaints.

Alongside the new requirement to reimburse victims, the PSR previously outlined plans to increase the incentives on all payment firms to do more to detect and prevent APP fraud from happening in the first place, including splitting the cost of reimbursement 50/50 between “sending” and “receiving” firms.