UK banks are set to be given new powers to delay and investigate payments they suspect could be fraudulent.

The government has proposed new laws that will allow payments to be delayed by as much as 72 hours when there are reasonable grounds to suspect a payment is fraudulent to give banks the time they need to investigate.

Currently banks must either process or refuse a payment by the end of the next business day.
Fraud accounts for over a third of all crime in England and Wales, with an estimated £460 million lost to it last year.

This has been in part driven by the growing number of purchase scams and the emergence of so-called ‘romance scams’, where victims target vulnerable people and trick them into transferring large amounts of money by pretending to be interested in a romantic relationship.
The government said the proposed rules will help protect people against these types of scams.

Banks who have reasonable grounds to suspect a payment is fraudulent will need to inform customers when a payment is being delayed. They will also need to explain what the customer needs to do in order to unblock the payment.

The government claims the need for evidence to trigger a delay will help protect people and businesses from unnecessary payment delays. Banks will also be required to compensate customers for any interest or late payment fees they incur as a result of delays.

“Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people,” said economic secretary to the treasury, Tulip Siddiq. “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.”

The news was welcomed by consumer champion Which?, with the organisation’s director of policy and advocacy Rocia Concha calling the move a positive step.

“These measures should be used in a careful and targeted way,” she added. “Financial firms of all sizes should also ensure they share intelligence and work with the police and other authorities to shut down accounts used for fraud and pursue the criminals behind them.”

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