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The Payment Systems Regulator (PSR) is implementing a groundbreaking reimbursement policy to tackle the growing menace of authorised push payment (APP) scams. This new requirement mandates payment service providers (PSPs) to reimburse victims of APP scams, marking a significant shift in consumer protection and industry responsibility. By embedding this policy within the Faster Payments system, the PSR aims to enhance fraud prevention measures while providing critical financial redress to victims.
Authorised push payment scams occur when individuals or businesses are deceived into transferring money to fraudsters posing as legitimate payees. These scams have become increasingly sophisticated, exploiting trust and creating scenarios where victims willingly send funds to criminals. The impact of APP scams is severe, with the latest figures showing a staggering £459.7 million lost to these scams in 2023 alone. The emotional and financial toll on victims can be devastating, underscoring the urgent need for robust protective measures.
APP scams typically fall into two main categories:
Given the increasing frequency and sophistication of APP scams, the PSR expects financial institutions to take more decisive action in preventing these scams and ensuring that victims are adequately protected.
At the core of the PSR’s strategy is the introduction of a mandatory reimbursement framework, which will come into effect on 7 October 2024. This policy represents a comprehensive response to APP scams, holding PSPs accountable for reimbursing victims, with specific exceptions to encourage consumer vigilance. The key components of the policy include:
The reimbursement requirement reflects a significant policy shift that began in May 2022 when the Treasury announced its intention to legislate for mandatory victim reimbursement. The Financial Services and Markets Bill, which received Royal Assent in June 2023, empowered the PSR to enforce this requirement. Following extensive consultations, the PSR finalised its policy position in June 2023 and issued a final policy statement in December 2023, setting the stage for the new rules to take effect in October 2024.
In the lead-up to implementation, the PSR has published a detailed roadmap outlining the steps firms must take to comply with the new requirements. This roadmap provides clarity on policy details, legal instruments, and upcoming consultations, ensuring a smooth transition to the new regulatory environment.
The new reimbursement requirements are designed to prompt a cultural shift within the payments industry, emphasising fraud prevention and consumer protection. Key features include:
Beyond the reimbursement requirement, the PSR is spearheading a broader set of initiatives to improve fraud prevention across the payments landscape:
The PSR’s new reimbursement policy represents a transformative approach to combating APP scams. By mandating reimbursement and requiring PSPs to take on greater responsibility for fraud prevention, the policy not only offers vital protections to consumers but also drives a fundamental shift in the industry’s approach to security. As the first of its kind, this policy sets a new global standard for financial regulation, aiming to reduce the incidence of APP fraud and restore consumer confidence in the payments system.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Hassan Zebdeh Financial Crime Advisor at Eastnets
08 October
Jelle Van Schaick Head of Marketing at Intergiro
07 October
Kuldeep Shrimali Consulting Partner at Tata Consultancy Services
Nikunj Gundaniya Product manager at Digipay.guru
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