UK Banks Granted Power to Delay Suspicious Payments

Banks will be able to delay payments for up to four days if there are reasonable grounds to suspect fraud.

The UK government has introduced legislation that will give banks the power to pause payments for up to four days to investigate fraud suspicions and help protect customers.

According to a statement, the new law proposed by the government will extend the time that payments can be delayed by 72 hours where there are “reasonable grounds” to suspect a payment is fraudulent and more time is needed for the bank to investigate.

Currently, banks must either process or refuse a payment by the end of the next business day. Moving forward, in the event of a delay, banks will have to inform customers about the action. They must also explain what the customer needs to do in order to unblock the payment.

The need for evidence to trigger a delay is intended to help protect against unnecessary payment delays. Banks will also be required to compensate customers for any interest or late payment fees they incur as a result of delays.

Tulip Siddiq, Economic Secretary to the Treasury, said that hundreds of millions of pounds are lost to scammers each year, particularly targeting vulnerable communities and ruining the lives of ordinary people. It is estimated that victims lost GBP 460 million (USD 600 million) to fraud last year.

“We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave,” Siddiq said.

The previous UK government had initially introduced the legislation in March this year, setting an implementation date of 7 October 2024. The new legislation sets an implementation date at the end of October.

The rules will come into force a few weeks after the introduction of a stricter mandatory scheme on fraud compensation. From Monday (7 October), fraud victims will be able to receive up to GBP 85,000 in refunds from banks within five days of an authorised push payment (APP) fraud.