LONDON (Reuters) – A mandatory 24-hour delay on all first-time payments from one bank account to another would cut mounting fraud in finance, UK lawmakers said in a report on Friday.
Parliament’s Treasury Select Committee said fraudsters stole over 600 million pounds from consumers in the first half of 2019 and regulators must crack down harder on scammers.
With money transfers between accounts taking just seconds, customers or their bank have little time to be aware that a fraud has taken place, the report said.
It recommended a mandatory 24-hour delay on all initial or first-time payments, while all future payments to that same account would be at normal speed.
“If a situation arose whereby an initial payment was needed instantly, a customer could ring their bank and additional checks could be carried out for the funds to be released,” the report said.
Some reforms to cut fraud are already in the pipeline.
To transfer money at Britain’s major lenders, the name of the recipient account holder must be confirmed by the receiving bank to stop fraudsters from diverting money.
Banks have said the deadline presents IT challenges and that smaller banks won’t be included until later on, but lawmakers said the change should be introduced as a matter of urgency.
“If the implementation date of March 2020 begins to look in doubt, regulators should consider introducing sanctions, such as fines, to firms who have not met the deadline,” it said.
Banks and card companies prevented 820 million pounds in fraud in the first half of 2019, according to UK Finance, a banking trade body.
But lawmakers want the Financial Conduct Authority (FCA) to set a “challenging” timeframe for banks to freeze accounts when there is evidence that money has been received fraudulently.
Banks use a voluntary industry code to determine when a customer should be reimbursed for unwittingly sending money to a scammer.
Lawmakers said the code should be made compulsory through legislation and the FCA should introduce a common definition for what constitutes gross negligence on the part of customers, which limits compensation.
The FCA should also take timely and appropriate action to stop “blanket de-risking”, the report said in a reference to banks cutting off relations with customers deemed to be too risky.