New powers enabling banks to delay transactions by up to four days to further investigate fraud have been criticised by conveyancing representative bodies.
The new powers, which were originally due to come into effect in early October, will allow banks to delay payments for up to 72 hours where there is reasonable grounds to suspect a payment is fraudulent. They will need to inform customers when a payment is being delayed and explain what the customer needs to do in order to unblock the payment.
The need for evidence to trigger a delay will help protect people and businesses from unnecessary payment delays. Banks will also be required to compensate customers for any interest or late payment fees they incur as a result of delays. will be introduced at the end of October.
The government say fraud accounts for over a third of all crime perpetrated in England and Wales, making it the largest form of criminal activity in the country.
It cites examples including romance scams and payment fraud as examples of activity where criminals target individuals and pocket large amounts of money via push payment transfers.
It’s a story familiar to conveyancers who have been alert to ‘Friday fraud’ scams for some years. Criminals attempt to intercept communications between firms, and between firms and their clients to advise of bank account changes to divert funds to fraudsters bank accounts.
But this latest initiative could be ‘bad news’ for the profession says Bold Legal Group boss Rob Hailstone.
“The risk that some transactions (even if very few) could suddenly be delayed on the day of completion, with a possible four day wait before release of funds, is bad news for home movers, conveyancers, removers and estate agents.”
“More transactions than ever are already completed on the same day that exchange takes place, and that number could now increase. The challenges for conveyancers, removers and estate agents to assist home movers if that delay occurs will be great, but nothing compared to the challenges that home movers, ready and packed to go will face.”
Talking to the BBC, managing director of economic crime at UK Finance Ben Donaldson said the new law could be used ‘fairly sparingly’ adding
“UK Finance has long called for firms to be allowed to delay payments in high-risk cases where fraud is suspected, and we are delighted to see proposed new laws supporting this.”
“This could allow payment service providers time to get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money. This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals”
The Society of Licensed Conveyancers said a 72 hour delay could be ‘catastrophic‘ and said it was “deeply concerned” for people who are buying a home and have to transfer large amounts of money quickly.
“No one wants to get caught up in a fraud, but is giving banks this power using a sledgehammer to crack a nut? If banks suspect a fraud, they must notify all relevant parties that there will be a funds delay as early as possible, and not at the last minute.
Concluded Hailstone.
As part of the regulations banks will be required to compensate customers for any interest or late payment fees they incur as a result of delays. Whether this includes costs associated with transaction delays remains to be seen.
3 responses
We’ve already experienced these kind of issues and it’s beyond frustrating.
Twice in the last 6 weeks, we’ve had lawyers on the other side using Metro Bank, who use Barclays as their processor, “lose” money between them and caused a delay of a week and another for 3 days.
I can confirm that yes – it DOES cause chaos.
Let’s go back to using cheques/bankers drafts
When you read the legislation it does say that the banks will have to cover the cost of interest of charges incurred. They will also only do it for suspicious activity – I am guessing that payments to a lawyer are not suspicious and banks will not want to put their necks on the line for the cost of delay. But lawyers should ask their banks how to opt out (the regulations do allow them to)… if they want to – after all payments from lawyers to the criminals committing seller impersonation fraud might have picked it up.