MPs call for firm regulatory response to curbing economic crime
UK law makers have suggested banks introduce a 24-hour delay on all first-time payments between accounts, in a bid to curb economic crime.
The Parliament’s Treasury Select Committee has revealed that in the first half of 2019 fraudsters stole £600 million from consumers, and urged for a firm regulatory response to crack down on fraudsters.
In a document published on Friday, the committee recommended that banks introduce confirmation of payee as a matter of urgency, warning that every delay leaves more people vulnerable to economic crime.
Responding to arguments put forward that confirmation of payee implementation could be harmful for competition if large firms implemented before small ones, the committee said these are “without merit”.
“Competition in the banking sector exists for the benefit of customers, not for the benefit of firms. Customers should not be put at risk of becoming victims of fraud, in order to protect slow adopting firms from implementing protections for their customers,” it said.
Another recommendation is the introduction of a mandatory 24-hour delay on all initial or first-time payments, during which time a consumer about to be defrauded could remove themselves from the high-pressure environment in which they are being manipulated.
The Parliament’s Treasury Select Committee has argued that all future payments to that same account could flow at normal speed to minimise inconvenience to customers. However, 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 committee applauded the introduction of the Contingent Reimbursement Model (CRM), which came into effect on 28 May, describing it as a “welcome step” to set out how its signatories should reimburse money lost to consumers by certain types of fraud.
The CRM is a voluntary financial services industry code that sets out how its signatories should reimburse money lost to consumers via authorised push payment (APP) fraud.
MPs are now calling for it to be made compulsory, suggesting that firms should consider retrospectively reimbursing customers back to 2016.
It added that regulators should define the term “grossly negligent” to provide consistency on whether or not a consumer is reimbursed.
The committee also welcomed the FCA’s recent rule changes requiring financial firms receiving payments to ensure that they are not inadvertently assisting economic crime.
However, it expressed concern at the lack of power financial institutions have to recover money sitting in bank accounts once it has been reported as stolen.
“Given the development of MITS technology, the government should review the current legislation around recovery of stolen funds to ensure that victims can be reimbursed as quickly as possible, whilst protecting legitimate transactions,” it said.
The MPs concluded that education has an important role to play in the wider fight against economic crime.
“We recommend that financial firms should undertake targeted education campaigns where trends have been identified and when new scams appear,” the committee said.
“These should include information at the point of opening an account about the consequences of being a money mule and information regarding emerging frauds so that consumers can stay vigilant.”