Law 360 quotes Caroline Greenwell on the UK’s APP fraud reimbursement plan

The mandatory reimbursement requirement for APP fraud comes into force on 7 October 2024.

The new rules, which were announced by the PSR on 7 June 2023, will require UK PSPs to reimburse in-scope customers who fall victim for APP fraud. Reimbursement will be split 50:50 between the paying and receiving banks up to a maximum of £85,000 for each single APP fraud case. Reimbursement will only be refused if the customer has failed to meet the consumer standard of caution through gross negligence (as long as the customer is not vulnerable).  

However, the fraud reimbursement scheme as it stands has the potential to be exploited by organised crime

Caroline Greenwell, Partner, shares her thoughts with Law 360:

I think fraudsters could see the reimbursement scheme as a free hit, meaning that more fraudulent schemes will emerge, potentially of a more sophisticated nature, with fake victims of fraud colluding with the fraudster who receives the money. 

On reimbursement, Caroline adds that large companies might compensate clients for claims even when they have not met the standard of caution to avoid adverse publicity on social media. But smaller payment outfits might not be able to afford to pay compensation when clients have been careless about fraud. They will probably ask more questions and scrutinise their conduct before and after the fraud.

I think it's possible that the gap will widen between large and small payments firms in how they handle APP fraud, in that the big banks will be even more accommodating to consumers than the smaller firms are and can afford to be.

Read the full piece in Law 360 here.