Guardian Money has long argued that UK bank transfers need some simple but important reforms that would stop a great deal of bank fraud in its tracks, but the financial authorities have failed to respond – until now.
As things stand, you can put any name into a money transfer request (even Mickey Mouse) and the payment will go through as long as the sort code and account number match up.
This has been a boon for people scamming bank customers as most people are unaware that the account holder’s name is irrelevant when moving money. This enables fraudsters to tell their victims that a safe bank account has been set up in their name, and to persuade them to move their money into “their” account. It also means bank customers may pay the wrong person by accidentally mistyping the account details.
Combined with the introduction of the faster payments system, this practice has, in the words of one police officer, been “a fraudster’s dream” allowing stolen money to be sent between as many as 30 accounts in a matter of hours.
Several financial experts are calling for the account name to be made an integral part of the payment process – and it seems the authorities have finally taken this on board.
Payments UK, which represents all banks and other payments providers, has proposed introducing a “confirmation of payee capability” to the payments system. Although short on detail, the change would be likely to require some form of ID to become part of the payment process – the name of the account holder or some other notifier, such as a mobile phone number. Such a move would require an overhaul of the payments systems and could take several years to introduce.
Richard Emery, who runs security consultancy 4Keys International, has called on banks to bring in a 24-hour cooling-off period to stop users sending large sums – say more than £250 – to a newly set-up payee. He also wants account-holder names to match payments. “A solution would be that, when you set up a new payee, your bank automatically contacts the payee’s bank, which would then send back the account name. This would reduce fraud and eliminate the problems that occur when the payer enters the wrong payee account details,” he says.
One of the big problems that victims face is obtaining assistance from the banks after such incidents. The banks have, in general, shown little interest in following the money to trace their customers’ losses – mostly, critics say, because it is time consuming and they are not bearing the loss. Victims have called on the Financial Conduct Authority to force the banks to do more.
