The UK has seen a significant increase in authorised push payment fraud. This is where someone is deceived into authorising a payment either to an account that they think belongs to a legitimate payee but is actually controlled by a fraudster, or for something they believed was legitimate but is actually fraudulent.

Reducing and preventing financial crime, including APP fraud and money laundering, is a priority for the FCA and is a key outcome in its Business Plan. 

Therefore, it is consulting about changes it plans to make to its Payment Services and Electronic Money Approach Document to support new legislation to tackle APP fraud.

To reduce the impact of APP fraud and encourage the payment industry to invest further in fraud prevention, the Payment Systems Regulator (PSR) has introduced an APP fraud reimbursement requirement within the Faster Payments System. This comes into effect on 7 October 2024. This requirement means banks and other payment service providers (PSPs) will have to reimburse payment service users who fall victim to APP fraud in most cases

The Treasury has proposed amendments to the Payment Services Regulations 2017 so that Payment Service Providers (PSPs) can delay making a payment transaction where they have reasonable grounds to suspect fraud or dishonesty. The Treasury will lay this before Parliament in due course.

The policy aims to increase firms’ ability to tackle APP fraud while minimising the impact on legitimate payments.

To support this policy, the FCA is proposing changes to its guidance on Payment Services and Electronic Money to explain how PSPs should apply the legislative changes to minimise the impact on legitimate payments. It is also consulting on changes which explain how the FCA expects PSPs to address suspicious inbound payments while continuing to process payments quickly and efficiently. 

The changes also aim to help PSPs take a proportionate approach in line with the legislation’s intended effect. This will include clarifying:

  • when and how PSPs should consider whether to delay an outbound payment transaction, and when to tell customers about these;
  • how PSPs should treat potentially suspicious inbound payment transactions; and
  • how it will monitor and evaluate PSPs’ implementation of the payment delays legislation, and the types of information it plans to get from PSPs.

The FCA wants to:

  • minimise impacts on legitimate payment transactions, such as uncertainty about how long the execution of a payment order will take;
  • offer additional clarity and detail on issues such as the threshold for delays, as well as the treatment of inbound payments so that firms adopt a similar approach; and
  • monitor trends in the sector, to understand the effect of the payment delays legislation, to identify outlier PSPs and to enable it to make targeted supervisory interventions where needed.

The consultation ends on 4 October 2024, following which the FCA will update the draft guidance to reflect feedback. It plans to publish the revised guidance for payment services by the end of 2024.