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Banks receiving scam payments told to step up

Emma Lunn
Written By:
Emma Lunn
Posted:
Updated:
08/02/2023

Financial firms on the receiving end of payments where customers have been victims of authorised push payment (APP) scams have been told to take more responsibility by the regulator.

The Lending Standards Board (LSB) has made updates to the Contingent Reimbursement Model Code (CRM Code), requiring signatory firms receiving scam payments to play a greater role in protecting the customer, by putting in place measures to stop such transfers.

APP scams happen when a person or business is tricked into sending money to a fraudster posing as a genuine payee.

Under changes to the LSB code, banks will be required to go further in identifying new and existing accounts at higher risk of being used by criminals.

The LSB has given banks until December 2023 to start monitoring the payments they receive to help them identify suspicious inbound payments and accounts that might be being used by scammers. This will help firms stop the onward movement of funds they believe are linked to scams and to recover the money lost by customers who fall victim to these scams.

Emma Lovell, LSB chief executive, said: “It is essential that firms do all they can to stop criminals from opening bank accounts and using their services to receive scam payments. Strengthening the code’s provisions means putting in place another tripwire for fraudsters looking to steal people’s savings – not to mention the money needed for essential living costs.”

The CRM Code, launched in 2019, is the only set of protections requiring signatory firms to tackle APP scams by detecting them and putting in place measures to stop them. Where scams slip through the net, the code also requires those signed up to reimburse customers who lose money through no fault of their own.

The Payments Systems Regulator (PSR) is currently consulting on a proposal for mandatory reimbursement for victims of scams where more than £100 is stolen.

“We share the PSR’s drive to ensure more victims are reimbursed where they are not to blame for the success of a scam, but are eager to ensure that fraud detection and prevention continue to be prioritised alongside reimbursement,” said Lovell, “Reimbursement can repair the financial impact on the victim, but it is still very much a lose, lose outcome.

“Victims lose because they will feel the after-effects and trauma of being scammed even after reimbursement and society loses as organised criminals reap the rewards of theft. We strongly believe that firms should continue to sign up and adhere to the CRM Code. Scammers aren’t slowing down, and so we cannot take our eye off the ball.”