Banks have quietly launched a vital security crackdown to prevent fraudsters intercepting payments. Online bank transfer payments will now be blocked if the recipient’s name and account number do not match.
A box will pop up asking you to check the payee’s details for errors – and alerting you to potential fraud. This will happen even if you only enter one wrong letter or use someone’s nickname.
Previously, banks did not check whether the name was correct on a bank transfer. It meant you could put down ‘Bugs Bunny’ and, as long as the right sort code and account number were entered, your payment would go through.
Security: When all the payee’s details match, money will be sent
But that made it too easy to get a digit wrong and send money to a stranger’s account. Some customers have struggled to get their money back again after these so-called fat-finger errors.
Fraudsters also found ways to exploit the loophole, masquerading as Revenue & Customs or a victim’s builder or estate agent while giving out their own bank sort code and account number for payment.
All the major banks were originally told to introduce the new ‘confirmation of payee’ name-check system by the end of March. But because of the Covid-19 crisis, the deadline was extended to June 30.
The Mail on Sunday can reveal all the big banks have now rolled out the technology. Here’s what you need to know…
SO HOW DO BANK PAYMENTS WORK NOW?
If all this new technology sounds like a big headache, it needn’t. There are no new security passwords to remember – you just need to know exactly who your money is being sent to.
When you make a banking payment online or via a mobile banking app you will be asked to put the recipient’s account number, sort code and name as usual.
If the name you enter matches the one registered for that account number and sort code, you will receive a confirmation on screen and the payment will go through.
However, ‘fat-fingered’ users will find that any spelling mistakes or typos will flag up an alert. This includes abbreviations when you believed the correct details have been provided.
For example, paying someone you know as Dan Smith whose full bank account name is Daniel Smith may not work.
If you’ve entered the wrong details, a confirmation of payee alert will pop up asking you to check for errors. You will be able to cancel the payment, edit the recipient’s details or send the money anyway, over-riding the security warning.
If the name entered is close to the real one linked to the account the alert should tell you.
When making a banking payment online or via a mobile banking app you will be asked to put the recipient’s account number, sort code and name as usual
ARE ALL THE BANKS USING THIS SYSTEM?
No. It has taken until now for the Payment Systems Regulator watchdog to knock the heads of the banks together to get them to agree to the changes – because ultimately beating the fraudsters saves both customers and banks money.
But not all banks are involved at this stage. Those signed up to the deal include Barclays, Lloyds, NatWest (as part of Royal Bank of Scotland), Santander, HSBC and Nationwide Building Society.
Yet others, including Co-operative Bank and Metro Bank, are not being told they must also fall into line. According to the watchdog, major banks have until the end of June to ensure they have introduced this new checking system to avoid a fine.
WHY BRING IN THE EXTRA HASSLE?
To beat criminals. According to the consumer group Which?, bank transfer fraud has seen people cheated out of £320million over the past three years.
This new move aims to put a stop to some of the most brazen scams. For example, say you get an email from a crook pretending to be your builder and providing an account number and sort code for payment. Now, the system will prove a major help.
According to the consumer group Which?, bank transfer fraud has seen people cheated out of £320million over the past three years.
When you enter your builder’s name in your online banking payments screen, an alert will flash up saying that name doesn’t match the account and sort code.
You can cancel the payment and contact your builder directly to confirm the scam. Beware, though, the security isn’t totally foolproof. Far from it.
For example, the crook may have set up an account with a very crafty name which may not raise suspicion. Equally, they may try to trick you into believing that the unfamiliar name on the account is nothing to worry about.
Frankie Dowling, head of compliance for the online banking service Amaiz, says: ‘Although this is a step in the right direction, I fear the system is potentially flawed and it might catch less than 10 per cent of fraudsters – so customers should remain wary.
Crooks can get around these checks. It will not stop you being defrauded if you use the account details given to you by the scammer and then tap in a name used by them.’
She adds: ‘It may also cause problems for people wanting to make a genuine payment. It might be a typing error or caused by you putting in an abbreviation of a name, perhaps the one you know them by – not the one officially registered.’
Frankie Dowling, head of compliance at Amaiz, fears the new system is potentially flawed and might catch less than 10 per cent of fraudsters – so customers should remain wary
WILL ALL PAYMENTS BE CHECKED?
Most everyday payments to friends, family and businesses will be checked. This is because confirmation of payee will be used for sending money via so-called faster payments – where cash goes within a couple of hours by electronic transfer.
Also included are new standing orders. Same-day electronic payments using CHAPS (Clearing House Automated Payment System) will also be subjected to the name checks.
CHAPS is run by the Bank of England and enables different banks to seamlessly transfer money between each other. It can be used for transferring high values, such as buying a house.
But payments that are used through another electronic payment system used for bank-to-bank transfers known as BACS (Bankers Automated Clearing Services) are not signed up to confirmation of payee.
These can take three days for money to move between accounts. Also excluded are direct debits and payments authorised via third parties such as PayPal or Visa.
WHAT ABOUT PEOPLE I’VE PAID BEFORE?
If you’ve paid someone before, often those details are stored for quick access in your online banking. The banks told us these payments shouldn’t be affected by the new confirmation of payee checks. However, there are reports of gremlins in the system – so be wary.
And any ‘amended payments’ – people or businesses that you have paid in the past but have changed bank account details or perhaps a name – will be affected.
If one of the major banks signed up to the security checks fails to flag up an alert and you fall victim to a scam, the Payment Systems Regulator says the bank should reimburse you. It might also face a fine for having failed to offer the new service.
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