Draft UK Legislation to Address Push Payment Fraud

HM Treasury has published a policy note and a draft statutory instrument—The Payment Services (Amendment) Regulations 2024—on a risk-based approach to payments to mitigate against authorized push payment fraud. HM Treasury confirms its policy for allowing payment service providers to delay payments processing when there are reasonable grounds to suspect fraud or dishonesty. The draft statutory instrument amends the Payment Services Regulations 2017 to allow PSPs to delay executing an outbound payment transaction by up to four business days from receipt of the order where there are reasonable grounds to suspect fraud or dishonesty by someone other than the payer and the payer's PSP requires the time to contact the payer (its customer) or a third party (e.g., law enforcement) to determine whether to execute the payment.

The Financial Services and Markets Act 2023 (discussed in our client note, "A Boost for UK Financial Services") imposed a new obligation on the Payment Systems Regulator to require payment service providers to reimburse consumers when a payment is executed over the Faster Payments Scheme and the payment was executed following fraud or dishonesty. The PSR published late last year its Final Policy Statement for fighting authorized push payment scams.

HM Treasury intends to lay this instrument before Parliament in summer 2024. It is expected that the new legislation will apply from October 7, 2024, which is the same date that the PSR's rules on mandatory reimbursement for APP fraud take effect.

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