Shearman & Sterling LLP | Financial Regulatory Developments Focus | UK Payment Systems Regulator Consults on Reimbursement of Victims of Payment Scams
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  • UK Payment Systems Regulator Consults on Reimbursement of Victims of Payment Scams
    11/07/2017
    The UK Payment Systems Regulator has published a report on the initiatives it has engaged in with banks, the payment systems industry and the Financial Conduct Authority to prevent or mitigate harm to consumers from scams which involve tricking people into sending money to fraudsters. This type of scam is known as an authorized push payment, or APP, scam and is the second biggest type of payment fraud reported in the UK behind card fraud. The PSR has previously investigated APP scams following a Which? super-complaint in 2016 and concluded in its response to the super-complaint that more needed to be done to address them.

    The report outlines the progress made in industry-led initiatives that are underway and that, taken together, should help prevent APP scams, ensure payment service providers respond faster when they do happen and help in recovering consumers' money. These initiatives include introducing best practice standards, and Confirmation of Payee, sharing financial crime data and information and transaction data analytics. To ensure continued progress, the PSR has set reporting milestones with which the trade association UK Finance and the New Payment Systems Operator will need to comply from June 2018.

    The report also sets out for consultation a proposal by the PSR for an industry-led "contingent reimbursement model", to be implemented by the end of September 2018, which would complement existing informal arrangements used by PSPs to reimburse victims of APP scams. PSPs that adopted the contingent model would agree to reimburse victims under specified circumstances. The report outlines the high level principles for the model and seeks feedback on how the model should be further developed, implemented and administered.

    The FCA, which contributed to the PSR's report, has issued a response in support of the industry-led initiatives and stated that it intends to actively monitor the adoption, implementation and impact of the best practice standards.

    Comments on the consultation are requested by January 12, 2018.

    View the Report and Consultation and Annexes.

    View FCA Response to the Report and Consultation.

    View PSR Response to Which? Super-complaint, December 2016.