Regulator wants more banks to introduce a scheme that warns people making bank transfers when the account and the name do not match.
Fraudsters are trying to convince people to ignore “no match” warnings when the bank account they are transferring money into does not match the name of the person they think they are paying, according to a regulator.
The Payment Systems Regulator (PSR) said it expects to see more action from financial institutions to stop scams where people are tricked into transferring money to a fraudster and to better protect and reimburse people if they do fall victim.
Recent figures show that in the first half of 2021, £355 million was lost to authorised push payment (APP) scams where people were tricked into paying criminals directly.
Some banks have been introducing an added layer of protection for customers called confirmation of payee – which tells people making payments whether the account they are trying to pay into matches the name of the person they think they are paying.
As well as protecting against fraud, this can help to prevent people accidentally paying money to the wrong bank account.
The PSR said there were now more than one million confirmation of payee requests every day.
But in a document published on its website, the PSR said it had been told following a call for views: “There has been increased social engineering of victims by fraudsters to convince customers to ignore ‘no match’ warnings.
“In some cases, fraudsters may even use the added level of confidence offered by (confirmation of payee) to manipulate victims into sendingmoney to mule accounts.”
Money mules allow their accounts to be used by criminals to launder cash.
Some customers may also go ahead due to “click fatigue” or a lack of knowledge over how to interpret warnings, it was also suggested.
Overall, the PSR said evidence of the positive impact of confirmation of payee provided a compelling case for a wider rollout, which will give consumers better protection against fraud, prevent accidentally misdirected payments and provide greater industry protection.
It said it shared concerns that some scams continue even after a “no match” warning.
But it said its analysis had shown a continuing decrease in the number and value of scams that proceeded after such a warning.
It said: “This suggests that (confirmation of payee) may be leading to a greater number of customers relying on warnings and abandoningpotentially fraudulent transactions.
“It is therefore clear to us that there is a strong case for the wider rollout of (confirmation of payee).”
The PSR also said feedback suggested a shift in scams migrating toinstitutions that have not yet implemented confirmation of payee.
Chris Hemsley, managing director of the PSR, said: “Confirmation of payee has proven to be an effective way to stop scams from happening, but it should be widely available – we want to see more banks, building societies and financial institutions use this service to protect their customers.
“The work that has been happening to broaden the (confirmation of payee) service will mean that many more fraudulent and misdirected payments should be prevented.
“There is currently good progress being made in making the service more widely available, but we will step in if we need to, including if we think that progress is stalling.”
Gareth Shaw, head of money at Whic ? said: “While many banks now have confirmation of payee measures in place, the regulator needs to make it mandatory for all payment providers as soon as possible so all consumers can benefit from the same level of security.
“Which? has warned the regulator that relying on some providers to voluntarily use this vital name-check security has left gaps which fraudsters are exploiting in order to scam victims.
“With levels of fraud at an all-time high, confirmation of payee does not diminish the urgent need for a system of mandatory rules so that victims are treated fairly and consistently.”
Trade association UK Finance said protecting customers from fraud and stopping stolen money getting into the hands of criminals “is a priority for the industry”.
The statement from UK Finance continued: “Banks are fighting fraud on every front and confirmation of payee plays an important role. Earlier this year the UK’s six largest banks committed to making the necessary changes by the end of the year so more payment service providers can offer confirmation of payee. We will continue to work with the PSR and the industry in the important area.”