FCA's Review Reveals Alarming Trend: APP Scam Losses Soar

<p>UK
financial authorities are taking steps to combat the surge in authorized push
payment (APP) fraud, a persistent threat that has resulted in significant
financial losses for consumers and businesses. The Financial Conduct Authority
(FCA) and the Payment Systems Regulator (PSR) have jointly published a review
aimed at mitigating the risks associated with APP fraud and improving the
industry's overall response.</p><p>Key Points from the Report</p><p>Rising
APP Fraud Cases:
The report reveals a troubling trend. In the first six months of 2023, losses
due to APP scams reached £239.3 million, comparable to the previous year's
annual losses of £485.2 million. Even more concerning is the 22% increase in
reported cases in H1 2023 compared to H1 2022, totaling 116,324 cases. These
figures are likely an underestimate, as the National Crime Agency estimates
that 86% of fraud instances go unreported.</p><p>Reimbursement
for Victims:
Encouragingly, £152.8 million, representing 64% of the losses, was returned to
victims in H1 2023, marking a 13% raise from H1 2022. This
reflects an effort to support those who have fallen victim to fraud.</p><p>Government
Initiatives:
The UK government has taken action to address economic crime, acknowledging
that 40% of recorded crimes in the <a href="https://www.financemagnates.com/tag/uk/">UK</a> are now related to fraud.
The Economic Crime Plan and the Fraud Strategy, both published in 2023, outline
measures for transforming the nation's response to economic crime.</p><p>Firms
Under Review:
The review involves a risk-based sample of various financial firms, including
those of different types, sizes, and risk profiles. Data submitted by these
firms, as well as supervisory insight and customer complaints, played a role in
the selection of a diverse sample of 12 current account providers, challenger
banks, and payment firms.</p><p>PSR's
New Reimbursement Requirement:
In June 2023, the PSR introduced a policy statement, PS23/3, which outlines a
new reimbursement requirement effective from 2024. This requirement applies to
payments made and received by payment service providers using the Faster
Payments system and introduces consistent minimum standards for reimbursing APP
fraud victims.</p><p>Building
Stronger Anti-Fraud Strategies:
Many firms in the review had anti-fraud control frameworks that were still
developing and had room for improvement. Most firms recognized the need to
enhance systems and controls for detecting, preventing, and managing fraud throughout
the customer relationship, from onboarding to ongoing monitoring.</p><p>Expectations
from Firms:
The FCA and <a href="https://www.financemagnates.com/tag/psr/">PSR</a> expect
firms to establish effective governance arrangements, controls, and management
information systems to reduce APP fraud and losses. Additionally, firms are
urged to treat customers fairly, provide easy ways for reporting fraud, and
offer support to vulnerable customers. Mitigating the risks of money mule
accounts is also emphasized.</p><p>Preparation
for PSR's Initiatives:
Firms are encouraged to prepare for the PSR's new reimbursement requirement and
the expansion of Confirmation of Payee, which enhances security measures in
payment processes.</p><p>Preparing for Security Measures in Payment Processes</p><p>The
<a href="https://www.financemagnates.com/tag/fca/">FCA</a> and PSR highlight
that while tackling financial crime, including APP fraud, remains a priority,
the landscape of fraudulent activity is evolving. APP fraud is a type of scam
where individuals or businesses are tricked into authorizing payments to
fraudsters. The report delves into key findings and emphasizes the importance
of proactive measures to protect customers and reduce <a href="https://www.financemagnates.com/tag/financial/">financial</a> losses.</p>

This article was written by Tareq Sikder at www.financemagnates.com.