New name check rules will alert bank customers if they transfer money to fraudsters

Published by Stephen Little on 18 October 2018.
Last updated on 18 October 2018

Victims of bank fraud to be given new rights

From next year banks will have to alert customers if they transfer money to a new account and the name does not match as part of a new scheme from the UK payments operator.

Pay.UK – formerly the New Payment System Operator – says the 'Confirmation of Payee' service will reduce the risk of payments being sent to the wrong account and help combat authorised push payment fraud.

Currently, when you send an electronic payment you enter the name, the sort code and the account number. However, the account name is not checked.

Fraudsters are becoming increasingly sophisticated and are using this to trick people into sending money to the wrong account.

Under the new scheme, banks will be able to check the name on the account of the person or organisation you are paying when setting up a new payment or amending an existing one.

You will then be alerted if the name does not match the account.

Paul Horlock, chief executive of Pay.UK, says: “Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong post code. Even if you have used the correct name it won’t reach the intended destination – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account."

He adds: “Confirmation of Payee will let you check you have the correct name for the person or business you’re paying, giving better protection against certain types of fraud, and helping to stop accidental mistakes too.”

How will it work?

If the name matches when sending money, you will receive confirmation that the details match and the payment will go ahead.

If you use a similar name to the account holder you will be provided with 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 get the name wrong, you will be told the details do not match and advised to contact the person or organisation you are trying to pay.

The decision on whether to proceed with a payment will always rest with the sending customer – with the risks made clear if they choose to go ahead after receiving a non-match.

Pay.UK says banks, building societies and other payment providers will be able to roll out Confirmation of Payee next year.

Will it reduce fraud?

People are increasingly being tricked by fraudsters into authorising a payment to be made to another account – known as push payment scams.

During the first half of 2018 consumers lost £145.4 million because of authorised push payment scams, according to figures from UK Finance.

However, unlike credit card scams, victims of authorised push payment fraud are not entitled to the same level of protection.

Pay.UK says that Confirmation of Payee will help combat push payment scams as well as reduce the risk of errors.

However, it says there will still be some types of malicious payee fraud that Confirmation of Payee cannot address, such as purchase scams where someone is tricked into paying in advance for goods that do not exist.

Tom Clementson, director of consumer small and medium sized businesses at Shieldpay, says: “It’s a step in the right direction for protecting consumers online from fraudsters. However, it brings to question why these practices aren’t already in place."

He adds: “Banks and businesses still have some way to go to protecting customers online; adoption of technology is one solution that can help to eliminate the risk. Consumers can also ensure they do not become a victim by engaging in safe practices when buying or selling with people they meet online.”

A spokesperson from the Payments System Regulator adds: “This is an important step and we would like to see the banks implement this new protection as quickly as possible, giving everyone greater protection against fraud.”

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AS A TRAINEE ACCOUNTANT IN

AS A TRAINEE ACCOUNTANT IN THE 1970s, SEVERAL MEMBERS OF OUR FIRM WERE INVITED BY WHAT IS NOW THE NATWEST BANK, TO HAVE AN INSIGHT INTO THEIR PROCEDURES. THIS WAS OBVIOUSLY BEFORE THE DAYS OF PERSONAL COMPUTERS AND THE INTERNET. THEY TOLD US THEN THAT THEY DO NOT CHECK THAT THE RECEIPIENT NAMES ACTUALLY MATCH THE SORT CODE AND ACCOUNT NO. AS I WAS ALREADY AWARE HOW EASY IT IS TO TRANSPOSE OR MAKE OTHER MISTAKES WITH FIGURES, I STATED THIS WAS NOT SATISFACTORY AND THEY NEED TO MAKE MORE CHECKS BEFORE TRANSFERRING MONEY. SINCE COMPUTERS AND ONLINE BANKING HAVE BECOME MORE COMMON, WHY ON EARTH HAS IT TAKEN OVER 40 YEARS FOR THEM TO MAKE CHANGES. THEY ASK FOR THE NAME OF RECEIPIENTS WHEN SETTING UP PAYMENTS BUT THEN HAVE NOT BEEN USING THESE DETAILS TO VERIFY PAYMENTS. IN MY MIND THEY HAVE BEEN INCREDIBLY NEGLIGENT OVER THESE YEARS AND SHOULD BE HELD TOTALLY RESPONSIBLE FOR ALL FALSE TRANSACTIONS THEY HAVE MADE. SURELY SOMEONE WITHIN THE BANKING INDUSTRY SHOULD HAVE REALISED THIS PROBLEM DECADES AGO AND NOT WAITED UNTIL 2018 TO TAKE ACTION. HOW UTTERLY STUPID OF THEM NOT TO UNDERSTAND THIS PROBLEM WHEN EVEN ONE OR TWO FALSE PAYMENTS HAD BEEN MADE.

Thai banks have been doing

Thai banks have been doing this for years, if I make a transfer online or via my banking application, I choose the recipients bank, enter the account number and the name of the account holder will show up instantly, when I'm satisfied I enter my pin and the transaction goes ahead in an instant.