New anti-fraud measures: unintended consequences

eskbanker

Expotter said:

Well, within that PSR release this is also mentioned

• There will be new rules in Faster Payments – the payment system across which the vast majority of APP fraud currently takes place – strengthening Pay.UK’s2 ability to tackle fraud.  

without, as far as I can tell, any further details.

The policy document itself does explain that in more detail:

All policies will be put into the Faster Payments rules, with additional guidance and detail provided by us for some policies (see ‘PSR Guidance’ and ‘PSR Publication’ below). Specifically, the Faster Payments rules will include:
• reimbursement requirement and its scope (see Chapter 2)
• sharing the cost of reimbursement
• time limit to reimburse victims
• claim excess
• maximum level of reimbursement
• time limit for victims to claim

but that still doesn't address the earlier industry request for (selectively) more payment processing time in the consultation.

Expotter said:

And to be fair, both articles seemed to accurately report the announcement, just with a different tilt.

True, it's just a personal preference to read definitive sources really!

TheBanker

eskbanker said:

Expotter said:

Well, within that PSR release this is also mentioned

• There will be new rules in Faster Payments – the payment system across which the vast majority of APP fraud currently takes place – strengthening Pay.UK’s2 ability to tackle fraud.  

without, as far as I can tell, any further details.

The policy document itself does explain that in more detail:

All policies will be put into the Faster Payments rules, with additional guidance and detail provided by us for some policies (see ‘PSR Guidance’ and ‘PSR Publication’ below). Specifically, the Faster Payments rules will include:
• reimbursement requirement and its scope (see Chapter 2)
• sharing the cost of reimbursement
• time limit to reimburse victims
• claim excess
• maximum level of reimbursement
• time limit for victims to claim

but that still doesn't address the earlier industry request for (selectively) more payment processing time in the consultation.

Expotter said:

And to be fair, both articles seemed to accurately report the announcement, just with a different tilt.

True, it's just a personal preference to read definitive sources really!

I believe that was one of thr Government's fraud strategy commitments announced a few weeks ago, though. 

eskbanker

TheBanker said:

I believe that was one of thr Government's fraud strategy commitments announced a few weeks ago, though. 

Yes, that was where the thread started - like some other government 'commitments' it was framed as "Looking at giving banks more time to process payments...", but to be fair today's proposals are simply the next phase of the APP reimbursement model that's been work in progress for quite a few years now, by wrapping the existing voluntary code into more formal regulation, rather than something being introduced specifically as a result of some soundbites last month!

TheBanker

eskbanker said:

TheBanker said:

I believe that was one of thr Government's fraud strategy commitments announced a few weeks ago, though. 

Yes, that was where the thread started - like some other government 'commitments' it was framed as "Looking at giving banks more time to process payments...", but to be fair today's proposals are simply the next phase of the APP reimbursement model that's been work in progress for quite a few years now, by wrapping the existing voluntary code into more formal regulation, rather than something being introduced specifically as a result of some soundbites last month!

Ah yes, the pitfalls of only reading the most recent posts on a thread!

I think the reality is we will see banks introducing delays to payments irrespective of whether the regulations change to explicitly allow this. They already delay some payments where they suspect fraud. It would be very difficult for a regulator to criticise the banks for doing this. And I think if the bank could demonstrate that a payment appeared suspicious, FOS could not uphold a complaint about a delay, given they often criticise the banks for not blocking payments that turn out to be APP frauds. 

Question is, what happens during the delay. If the bank can speak to the customer, or persuade the customer to discuss their payment with a trusted friend, then maybe it will help. If the payment just sits there and the customer gets frustrated because nobody can tell them why, then it won't reduce fraud at all. 

boingy

The problem with all of this is that none of the banks will be taking on enough extra staff to minimise the inconvenience to customers. Co-op bank blocked a transfer and asked me to phone their fraud line and it took one hour and six minutes to get through to someone who then asked me a series of ridiculous questions that any scammer would breeze through. Examples:
Do you know where this payment is going to?
Is anyone forcing you to make this payment?
Are you any more stressed than normal? 

The stress question made me laugh - of course I'm stressed. My bank is blocking my payment and asking me lots of dumb questions!

These questions are the equivalent of an airport check-in desk asking you if you are a terrorist. I really don't believe they will have any real effect on reducing scams/frauds. I'm not sure where it will all end.

eskbanker

boingy said:

The problem with all of this is that none of the banks will be taking on enough extra staff to minimise the inconvenience to customers. Co-op bank blocked a transfer and asked me to phone their fraud line and it took one hour and six minutes to get through to someone who then asked me a series of ridiculous questions that any scammer would breeze through. Examples:
Do you know where this payment is going to?
Is anyone forcing you to make this payment?
Are you any more stressed than normal? 

The stress question made me laugh - of course I'm stressed. My bank is blocking my payment and asking me lots of dumb questions!

These questions are the equivalent of an airport check-in desk asking you if you are a terrorist. I really don't believe they will have any real effect on reducing scams/frauds. I'm not sure where it will all end.

While the purpose of such questions is notionally to prevent fraud, the fact remains that the APP scam code only holds banks liable if they haven't warned customers of risks, so if there's an audit trail of asking daft-sounding questions and the customer remains adamant that they wish to ignore any warnings, then this is likely to indemnify the bank against a subsequent claim.

Not sure what you're meaning by a scammer breezing through questions - they're not intended to be validating the identity of the payer but that of the payee.

In terms of taking on extra staff, I don't think there's anything within the current proposals that actually suggests more or longer checks being carried out by existing members, it's primarily about dealing with the financial consequences of fraud and legislating to extend its coverage from most banks to all banks, but Co-Op has been in the scheme all along....

eskbanker

TheBanker said:
I think the reality is we will see banks introducing delays to payments irrespective of whether the regulations change to explicitly allow this. They already delay some payments where they suspect fraud. It would be very difficult for a regulator to criticise the banks for doing this. And I think if the bank could demonstrate that a payment appeared suspicious, FOS could not uphold a complaint about a delay, given they often criticise the banks for not blocking payments that turn out to be APP frauds. 

Question is, what happens during the delay. If the bank can speak to the customer, or persuade the customer to discuss their payment with a trusted friend, then maybe it will help. If the payment just sits there and the customer gets frustrated because nobody can tell them why, then it won't reduce fraud at all. 

I guess we just need to wait and see what plays out - the government reference to 'looking at giving more time' appeared to be a response to the industry request to soften the requirement to pay by the end of the next business day that's enshrined in the Payments Services Regulations 2017, but it's not clear to me whether that is already being breached where (exceptional?) fraud is suspected or if they're all dogmatically sticking to the rules!

It's unsurprising that if banks are formally to be put on the hook for reimbursing APP scams then they'll push to mitigate that liability, so it'll be interesting to see where this all heads, but on the face of it that request from the consultation doesn't appear to have been factored into the current proposals....

boingy

eskbanker said:

In terms of taking on extra staff, I don't think there's anything within the current proposals that actually suggests more or longer checks being carried out by existing members, 

I think they need extra staff because customers like me who have almost never dealt with them on the phone are suddenly being compelled to. My wife and I have had to speak to banks on 7 or 8 occasions in the last few months, which is more than the previous decade (or two). One of mine was a transfer of £500 to an account in my name to which I transferred £10,000 weeks earlier (that transaction was held up too) so it wasn't exactly a high risk transfer. I think you are correct that it's mostly an a$$-covering exercise. I just wish they would be more sensible about which transfers they block and give us an easier way to confirm the transfer - app, email, text message etc.  

eskbanker

boingy said:

eskbanker said:

In terms of taking on extra staff, I don't think there's anything within the current proposals that actually suggests more or longer checks being carried out by existing members, 

I think they need extra staff because customers like me who have almost never dealt with them on the phone are suddenly being compelled to. My wife and I have had to speak to banks on 7 or 8 occasions in the last few months, which is more than the previous decade (or two).

Yes, we may have been talking at cross purposes - I was specifically meaning that (next year's) implementation of the proposals published yesterday shouldn't in itself increase the volume of fraud checks for banks already signed up to CRM (such as Co-Op), but that doesn't imply that current resourcing is adequate.

RG2015

I must applaud the input from those here to this issue. Many of these posts are erudite, well considered and provide a valuable insight in to what may result in the coming weeks/ months.

The great flaw however is that the two parties responsible for the content, goal and implementation are the government and the banks.

One is driven by the desire to satisfy public opinion and hence earn votes at the next election. The other is solely driven by the desire to satisfy their shareholders, and make money. They will do as little as possible to comply with the legislation.

The financial well being of the public at large is a poor third in the priority list. Nevertheless, many will benefit from these measures, although not necessarily the most deserving of these.

If I come across as somewhat cynical I do so unreservedly.