The Financial Conduct Authority forces banks to pay the Victims of Authorised Push Payment (APP) Fraud within Five Days

The rapid rise of the financial fraud, including Authorised Push Payment (“APP”) scams has become a significant concern for financial institutions, regulators and the Government. This type of fraud occurs when a victim is tricked into authorising a payment to a scammer, often believing that they are making a legitimate transaction to a legitimate organisation. The Payment Systems Regulator’s (“PSR”) review revealed that there were over 250,000 cases of APP fraud in 2023. The Home Office has announced that 1 in 15 people have been subjected to financial fraud.

The impact of APP is devastating to the victims and many banks have been making voluntary refunds of part or all of their customers’ losses, under the provisions of the Contingent Reimbursement Model code. Bank accounts can be emptied in a few minutes with individuals losing their entire life savings. This is about to change following new mandatory rules that will be instigated on 7 October 2024, under the Mandatory Reimbursement Requirement.

Demetri Bezanties, an Associate, commented “APP fraud is particularly distressing for the victims as the wrongdoers are very accomplished at impersonating genuine well respected financial institutions and very effectively deceive their victims into parting with all their money.” Demetri further pointed out “The PSR reports that there were instances where 18 people have been scammed to the tune of £415,000 and 411 lost more than £85,000. However, the larger sums were usually misappropriated over a series of scams. The new rules, outlined below, will not only provide compensation for 99% of the victims but will also incentivise the organisations themselves to develop infinitely stronger anti-fraud measures which will also protect consumers.”

The new rules that the banks and financial institutions must follow are to be introduced on 7 October are as follows:

• Compensation to a maximum of £85,000 is to be paid to victims
• Payment must be made within five days
• Once the payment has been made the bank or payment company may claim back half the amount from whichever financial institution the fraudster used to receive the stolen funds.

The Government believes that as the wrongdoers become more sophisticated the banking and financial services industry can do more to protect their customers and work together with online technology companies to develop strategies to protect consumers and combat fraud.

The former Economic Secretary, Andrew Griffith, said: “This is an important step in the Government’s fight against fraud…As payment scams become ever more sophisticated, it is right that the Government, the regulator and industry work together to ensure victims are not left out-of-pocket by fraudsters. In parallel, the Government is looking at how to enable banks to have the ability to identify and pause suspicious payments inflight where appropriate.” 

The Online Safety Act will play a part; one of its key elements is its requirement for online platforms, such as social media networks and search engines, take proactive steps to identify and remove fraudulent advertisements. Many APP fraud schemes begin with fake advertisements for investment opportunities or fraudulent products, which mislead consumers into transferring money to criminals. The Act imposes a “duty of care” on online platforms, requiring them to protect users from harmful content, including financial fraud and scams. Platforms are now expected to assess the risks posed to their users by wrongdoers who aim to perpetrate financial harms like APP fraud and take swift measures to mitigate these risks.

Greater collaboration between banks and online financial institutions together with law enforcement agencies with the sharing of data and intelligence on fraudulent activities can help prevent APP fraud schemes from reaching users. The online platforms will be obliged to publish, on an annual basis, any information detailing the steps that they take to combat fraud, as well as details as to the success of their fraud prevention measures, together with information of any incidents of fraudulent adverts or scams.

The increased collaboration between all parties that have the potential to be involved in APP considerably assists in closing down the opportunities for fraudsters to be able to access potential victims.

Demetri Bezaintes is an associate based in the London office within the Financial Services and Crypto Litigation Department. He is an SRA-regulated Registered Foreign Lawyer (RFL) in England & Wales and a qualified Greek Lawyer (dikigoros).

Demetri has a thorough knowledge of investment fraud and fund tracing. He works tenaciously for our clients, advising on cryptocurrency, Forex trading disputes and regulatory investigations. He draws his expertise in investment law from his experience in the banking sector and his experience in banking and financial services regulation. Prior to joining Giambrone & Partners Demetri worked at an international bank, where his main focus was the enforcement of freezing orders and third-party debt orders.

He approaches cross-border jurisdiction matters with a comprehensive view, based on his knowledge of both civil and common law. After qualifying as a lawyer in Greece, he obtained a Graduate Diploma in Law from the University of Westminster.

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