Banks: Authorised Push Payment Fraud

Lord Vaux of Harrowden Excerpts

Thursday 11th June 2020 Lords Chamber

[Baroness Penn]

My noble friend is right that it is essential that banks take proper steps to ensure that bank accounts are not opened fraudulently. The Financial Conduct Authority requires banks to maintain effective systems and controls to prevent the risk that they may be used to further financial crime. However, the code that specifies who pays compensation was drawn up with both industry and consumer groups and is getting reimbursements and compensation to those innocent victims. We should support a model that is supported by industry and consumer groups.

[Lord Vaux of Harrowden (CB) [V]]

I thank the noble Lord, Lord Young of Cookham, for asking the previous question, which I was going to ask. Does the Minister agree that, if we made the fraudster’s bank liable—it receives and handles the stolen money —it would greatly incentivise banks to vet customers and monitor suspicious activities much more rigorously, and that it would be more effective than the current situation of the victim’s bank deciding whether the victim has been acting reasonably?

[Baroness Penn]

As I said to my noble friend Lord Young, there are requirements on banks to ensure that, when bank accounts are set up, the firms identify and verify the customer’s identity. Under the voluntary code which was drawn up with industry, it is currently with the victim’s bank to pay reimbursements if the victim is at no fault in the fraud. Those arrangements expire at the end of this year, and the points that my noble friend and the noble Lord made may be raised with industry when looking at a long-term solution to the issue of reimbursing consumers.