Banks will soon have the power to put suspicious payments on hold for up to four days to give them more time to investigate fraud, the government has confirmed.
At the moment, transfers must be processed or declined by the end of the next business day, but the new law will permit an extension of three more days.
For years, banks have needed to have reasonable grounds to suspect fraud before being able to investigate but have also faced pressure from customers who want payments to be made instantly.
The long-proposed new regulations will come into force at this month, with a view to deterring criminals, including those who actively target property purchases, with the aim of conning people into transferring a deposit and/or the balance of purchase monies to them.
These schemes can be highly sophisticated, and almost always involve the criminals pretending to be a lawyer in order to trick consumers into sending payment to an account they control.
Payment diversion fraud – where criminals target a specific individual, impersonate others, create or amend invoices and divert payments to criminal-controlled bank accounts – is another major issue that affects everyone, though small and medium-sized businesses, such as estate agencies, are particularly vulnerable.
However, 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, according to Rob Hailstone, CEO, Bold Legal Group.
He told EYE: “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.
“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.”
But Ben Donaldson, managing director of economic crime at UK Finance, which represents the banking industry, thinks the new law will be used “fairly sparingly”.
“This is really relevant to cases of investment fraud and romance fraud where there is psychological manipulation of the victim,” he told the BBC’s Today programme.
