U.K. legislators are calling for a mandatory 24-hour waiting period on all first-time payments between bank accounts as a way to reduce fraud, Reuters reported on Friday (Nov. 1).
Parliament’s Treasury Select Committee said in a report that in the first six months of 2019, consumers were scammed out of roughly $777 million (£600 million). Fraud is the second most common crime type in England and Wales, and the committee wants regulators to get tougher on fraudsters.
Money transfers that happen in seconds offer little time for customers and banks to even know that fraud has taken place, the report said.
A 24-hour waiting period on all initial or first-time payments is being recommended by the committee. Future payments would revert to the regular time period.
“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 Treasury Select Committee report said.
There are already some reforms on tap to reduce fraud. By March 2020, for example, the recipient’s name must be verified before a money transfer can take place at Britain’s major lenders.
“If the implementation date of March 2020 begins to look in doubt, regulators should consider introducing sanctions, such as fines, to firms who have not met the deadline,” recommended the report.
Lawmakers said the voluntary industry code banks use to determine if someone should be reimbursed for transferring funds to a scammer should mandatory. Their report further said there needs to be a standardized set of criteria for what constitutes customers’ gross negligence, which limits compensation.
In May, a group of U.K. financial institutions signed a voluntary code to refund consumers and small business victims for fraud schemes. Banks have traditionally refused to refund fraud victims because many schemes actually involve the customer voluntarily initiating the payment.
Financial institutions are aiming to establish a more long-term solution by the beginning of next year. In the meantime, a central pot of funds to finance refunds will be used.