UK Financial Conduct Authority Finalized Guidance for Payment Firms that Enables a Risk-Based Approach to Processing Suspected Fraudulent Payments

The Financial Conduct Authority has published finalized guidance for payment service providers that enables a risk-based approach to processing suspected fraudulent payments. Following the publication of the Payment Services (Amendment) Regulations 2024, the amount of time that a PSP has to process an outbound payment when there are reasonable grounds to suspect fraud or dishonesty was extended to up to four business days. To support these regulations, HM Treasury asked the FCA to issue guidance to explain how it expects PSPs to apply these legislative changes, taking into account feedback from stakeholders.

Following a consultation in September, the finalized guidance sets out:

• the requirements for delaying outbound payments and determining whether the threshold for "reasonable grounds to suspect" has been met;
• how PSPs should use the payment delay window;
• obligations on PSPs if they delay an outbound transaction; and
• the treatment of suspicious inbound payments.

The FCA has amended its payment services and electronic money approach document to include the new finalized guidance. The guidance came into effect on November 22, 2024.

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