Eleventh Report - Economic Crime

We recognise and share the Committee’s concerns regarding payments fraud. The government is committed to tackling fraud within payment networks and recognises the actions of the financial services industry to help tackle Authorised Push Payment fraud. The government has recognised the actions of the financial services industry to reduce Authorised Push Payment fraud, including investment in anti-fraud capabilities, the creation of a voluntary reimbursement Code, and the implementation of initiatives such as Confirmation of Payee. However, there is more that needs to be done to prevent these scams, and to ensure that victims are not left paying for fraud through no fault of their own. The government therefore welcomed the publication of the Payment Systems Regulator’s Consultation on further measures to counter Authorised Push Payment scams on 18 November. In developing their approach to Authorised Push Payment scam reimbursement, the Payment Systems Regulator identified a barrier in the Payment Services Regulations 2017 preventing it from using its existing regulatory powers to introduce mandatory Authorised Push Payment scam reimbursement for scams which occur over Faster Payments. As such, in November 2021 the Economic Secretary stated that the Government would legislate at the earliest opportunity to address these barriers to regulatory action on Authorised Push Payment fraud. We welcome the introduction of the Confirmation of Payee service in 2019, as recommended by our predecessor Committee. We also welcome the work the Payment Systems Regulator is doing to broaden its scope through the introduction of Phase 2, extending and enhancing the service.

Improving data-sharing between banks is one of the measures which the PSR is implementing as part of its reform of the CRM Code. The Treasury should be ready to bring forward any legislation which is needed to enable this, and the PSR should ensure that banks act quickly in putting in place the necessary changes.

We welcome the report’s recognition of the progress OPBAS has achieved. Over the last four years, under the supervision of OPBAS, the Professional Body Supervisors (PBS) have made significant improvements in their compliance with their obligations under the MLRs. OPBAS is now focusing on the effectiveness of the PBS AML supervision. As OPBAS states in its third report, while some PBSs are demonstrating good practice, OPBAS found during its 2020/21 assessments, differing levels of achievement and some significant weaknesses in the effectiveness of supervisory frameworks that PBSs have in place – which is informing our future work plan in this area so that effectiveness is improved. OPBAS expects PBSs to continue investing in, and strengthening their AML supervision, to have the greatest impact on the prevention of financial crime and that the PBS will continue to work closely with other authorities to make the UK an inhospitable place for criminals. OPBAS will continue to evolve its approach to supervision, using a wider range of methods to enrich its understanding of risks and drive more effective supervision by PBSs. It will continue to make robust interventions where PBSs do not make required progress. The FCA is engaging with HM Treasury as part of its review of the AML/CTF supervisory regime. We will continue to monitor the de-risking of customers by banks. We recommend that the FCA report annually on numbers of de-risking decisions and on progress to ensure that banks are not unfairly freezing bank accounts and de risking customers.