Six major banks are about to introduce new safety measures for people who transfer cash to friends, family, businesses and other payees.
Barclays, HSBC and Lloyds are amongst those that will soon be carrying out name checks when sending money to third party accounts.
The new system, known as 'confirmation of payee', was first introduced in October 2018 and will become law on June 30.
It's part of efforts to clamp down on fraud that costs the UK more than £130billion a year.
Right now, to make a transfer, you have send over the recipient's account number and sort code. You can also send over a name, though banks don't have to verify this.
This loophole allows fraudsters to pose as someone else to trick you into sending money to a scammer's account.
It also means if you make a typo in the account number, you could easily end up sending money to the wrong person.
From June 30, you'll be able to ask you bank to carry out a name check before sending out any money.
They'll be able to check that the name on the account matches the name you're sending money to - and if it doesn't, they will notify you.
It means you can check who your cash is really going to, and stop the payment if necessary.
The June rules will apply to faster payments and CHAPS. Bacs payments, which are often used by employers to pay staff, will be added later in the year.
First Direct, Halifax, Lloyds and RBS (including NatWest) have already introduced the measures - while Nationwide and Santander plan to have it in place by June 30. TSB said it will follow by October 2020.
Importantly, the scheme will only work if both banks you're working with are registered. It only won't apply on international payments.
How confirmation of payee will work
When you transfer money, you will have to provide the name of payee, their sort code, account number and a payment reference as standard. Their name will have to be exactly as it appears on the card.
You'll then have to enter the type of account you're paying – personal or business.
Your bank will then check the records of the payee's bank to see if the name matches.
After you enter the name, along with the sort code and the account number, one of three things happen:
- If you used the right account name, you will get confirmation that the details match, and can go ahead with the payment
- If you used a similar name to the account holder, you will be told the actual name of the account holder to check. You can update the details and try again, or contact the intended recipient to check the details
- If you have entered the wrong name for the account holder you will be told the details do not match and advised to contact the person or organisation you are trying to pay
If you're doing a phone payment, you'll be told whether it's a match or not during the call. Online, you will be given a 'yes, match' notification.
The decision on whether to go ahead or not is still yours whatever happens - but the risks are made clear if you choose to go ahead after receiving a non-match.
