Authorised push payment fraud is when victims are tricked into sending money from their bank account to a fraudster. The Payment Systems Regulator (PSR)1 estimates that £482 million was lost to such scams in 2022 and many may not be reported.

These are classified as either “malicious payee” frauds where someone is tricked into making a payment for goods or services that don’t exist or are never received or “malicious redirection” where the fraudster is impersonating a bank or the police in getting someone to transfer funds out of their bank account to the fraudster.
Up to now, refunding customers for loss by banks has been voluntary and whilst in most cases, customers who have been defrauded have been compensated, not all have.
The government wants to regulate how banks deal with such frauds and a bill, The Financial Service and Markets Bill, is currently going through parliament and is likely to become law early next year.
It looks like this new act will provide:
- New rules in Faster Payments – the payment system across which the vast majority of APP fraud currently takes place – strengthening Pay UK’s (the digital system that manages all UK payments) ability to tackle fraud.
- All payment firms will be incentivised to take action, with both sending and receiving firms splitting the costs of reimbursement 50:50.
- Customers will be more protected under consistent minimum standards, with most APP fraud victims being reimbursed within five business days and additional protections offered for vulnerable customers.
- Industry will have clearer guidance to follow, including around the ability to apply a claim excess and maximum level of reimbursement.
According to Which? it looks like there will be a £250 excess charge that victims will have to bear, and they feel that this is a retrogressive step.
Readers should note that the PSR have categorised APP scams into eight categories:
1. Purchase scam: The victim pays in advance for goods or services that are never received.
2. Investment scam: A scammer convinces their victim to move their money to a fictitious fund or to pay for a fake investment.
3. Romance scam: The victim is persuaded to make a payment to a person they have met, often online through social media or dating websites, and with whom they believe they are in a relationship.
4. Advance fee scam: A scammer convinces their victim to pay a fee which they claim would result in the release of a much larger payment or high value goods.
5. Invoice and mandate scam: The victim attempts to pay an invoice to a legitimate payee, but the scammer intervenes to convince the victim to redirect the payment to an account they control.
6. CEO fraud: A scammer manages to impersonate the CEO or other high-ranking official of the victim’s organisation to convince the victim to make an urgent payment to the scammer’s account.
7. Impersonation – police/bank staff: A scammer contacts the victim purporting to be from either the police or the victim’s bank and convinces the victim to make a payment to an account they control.
8. Impersonation – other: A scammer claims to represent an organisation such as a utility company, communications service provider or government department.
Whilst it is good news that legislation is coming to regulate how banks will handle APP frauds it looks likely that the victim will not get all their money back. Therefore we should all be aware of these types of scams to ensure we don’t get caught by one.
1The Payments Systems Regulator was established by Government in 2014. It is a division of the Financial Conduct Authority, reports to Government but is financed by the banks with a budget of £27 million.