What is the Payment Services (Amendment) Regulations 2024?

Representing a significant step by the UK government, the Payment Services (Amendment) Regulations 2024 aims to enhance the security of payment services and combat payment processing fraud. The policy note published on the 12th March 2024 outlines a near-final version of the legislation that focuses on providing payment service providers (PSPs), such as banks, with more time to investigate suspicious payments.

Authorised push payment fraud and legislative change

This measure is particularly targeted at tackling authorised push payment (APP) fraud, where victims are deceived into sending money to fraudsters. APP fraud featured prominently in Complyport’s Webinar in January 2024,  which delved into the reasons why this form of fraud poses such a significant obstacle to overcome. As a reminder, according to the 2023 Half Year Fraud Update published by UK Finance, APP is one of the fastest-growing types of fraud, where fraudsters deceive consumers or individuals in a business into sending money to bank accounts that are controlled by the fraudsters.

The proposed legislative amendment, regulation 86, allows for the delaying of payment processing when there are reasonable grounds to suspect fraud or dishonesty. This additional time is intended to enable providers to contact the customer or relevant third parties for further verification, thus preventing fraudulent transactions from being completed.

Key points of the UK government’s strategy:

  • Delaying Suspicious Payments: PSPs will have the authority to delay payments they believe to be suspicious, providing more time for investigation.
  • Mandatory Reimbursement: The Payment Systems Regulator will be required to introduce a mandatory reimbursement requirement for payment orders executed over the Faster Payment System that are found to be fraudulent.
  • Risk-Based Approach: PSPs are encouraged to adopt a risk-based approach to payments, allowing further time to assess potentially fraudulent payments.

Government expectations from the financial services industry

  • Apply the appropriate due diligence: Implement more rigorous checks and due diligence processes to identify and prevent fraudulent transactions.
  • Adopt New Technologies: Utilise ‘confirmation of payee’ technologies and other innovations to improve payment security.
  • Maintain Compliance: Stay up to date with regulatory changes and ensure all operations are in line with the new requirements.

Looking ahead

Moving forward, the financial services sector can expect a continued focus on operational resilience and the safeguarding of customer funds. Firms will need to be proactive in adapting to these regulations, ensuring they have the necessary systems and controls in place to detect, prevent, and respond to fraud effectively. The government’s commitment to a Smarter Regulatory Framework signifies an evolving landscape where firms must remain vigilant and responsive to new challenges in payment security.

How Complyport can help

Complyport is the City’s award-winning compliance and regulatory consultancy that has been servicing financial services firms for over 20 years.

Complyport specialises in providing practical, hands-on Governance, Risk and Compliance support to financial services firms. We are prepared to support you with our Financial Crime & Forensic services made up of a highly experienced financial crime professionals team.

Our extensive experience and expertise across financial crime prevention can help protect your firm and your customers through a range of services including mitigating the risk of fraud, bribery or corruption through the appropriate implementation of effective fraud prevention policies, ensuring that you have robust AML/CTF controls and framework and providing bespoke AML training to your staff.

Whether you are an established firm looking for guidance, or a start-up needing advice, we are here to help.

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About Complyport

Complyport is a market-leading consulting firm supporting the UK financial services industry for over 22 years. We specialise in providing Governance, Risk and Compliance services to support the regulated financial services industry to raise standards and thrive.

Complyport can assist with the preparation of a GAP analysis and impact assessment on the investment firm’s capital adequacy and risk management framework of the Company under the regulatory framework.

We specialise in supporting the UK financial services industry with compliance guidance, advice and best practice.

  • Financial Crime Risk and Compliance support
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