Advertisment

New Regulations to Mandate Reimbursements for APP Fraud Victims

author-image
Sakchi Khandelwal
New Update
New Regulations to Mandate Reimbursements for APP Fraud Victims

As the festive season approaches, a regulatory Christmas present is in the pipeline for customers who have been victims of scams, particularly those entangled in Authorised Push Payment (APP) fraud. The new regulations, slated for release before Christmas, will necessitate banks and other payment firms to compensate these victims. The move comes in the wake of soaring APP fraud cases, which have seen a worrying 22% increase from the previous year, with losses amounting to a staggering £240 million in the first half of 2023 alone.

Advertisment

From Voluntary to Mandatory: A Shift in Regulatory Stance

The upcoming measures aim to replace the existing voluntary scheme, which has been much maligned due to the perceived reluctance of banks to compensate victims. The new rules enforce a compulsory system, under which the costs of reimbursement will be equally shared between the bank of the customer who dispatched the funds and the bank on the receiving end.

APP Fraud: A Growing Threat

Advertisment

APP fraud is a sophisticated scam in which individuals are duped into transferring money to criminals masquerading as legitimate entities. This can range from fraudsters posing as officials from local law enforcement agencies to fraudulent cryptocurrency platforms promising free Bitcoin and extraordinary returns using fake celebrity endorsements. The victims, more often than not, end up with nothing but a sense of betrayal and financial loss.

Extending Liability: The Role of Social Media

With scams on platforms like WhatsApp and Facebook Marketplace becoming increasingly prevalent, there are growing calls to extend the liability to social media companies. Mike Regnier, Santander UK's chief executive, has publicly voiced his desire to see these companies contribute towards the compensation costs. The Payment Systems Regulator, the industry watchdog, is expected to elaborate on the finer details of the scheme's operation in the coming fortnight.

Advertisment
Advertisment