For Policymakers, Fraud Prevention Is Everything, Everywhere, All At Once

All around the world last month, there was a focus on one key topic: fraud. 

It is truly the word du jour for the payments ecosystem and regulators alike, with various jurisdictions grappling with how on earth they can bring down alarming rates of fraudulent payments. There are buzz words as well for people to get their heads around: romance scams, investment scams, pig butchering, social engineering. 

All of them seem to have a similar outcome - consumers out of pocket and in many instances, humiliated, and payment service providers having to weigh up whether they should reimburse when in many instances, they aren’t legally required to do so (yet) and they have warned the customer about what may be about to happen. In this blog, we explore the approaches to fraud prevention across the world.

Fraud prevention in the UK

In the UK, we are just weeks away from the new authorised push payment (APP) fraud reimbursement rules that will become actionable on October 7 and see banks and payment firms liable to reimburse consumers. Suddenly, firms are liable to make payouts to the tune of as high as £85,000 and after the implementation date, it will be interesting to see how firms grapple with this. Will P2P transactions be limited? Will there be a rush to invest in AI technology? Or, could we even see firms exit the market or consumers de-risked, as has been suggested could happen by some?

Fraud statistics have been stuff of nightmares for the industry in the UK, and it is a subject that has even reached parliament, and has triggered a debate among the new intake of MPs, in a sign of just how much it must be coming up in these inaugural constituency surgeries. During a House of Commons debate in September, Labour MP Luke Charters criticised the current fragmented approach to tackling fraud and proposed creating a national anti-fraud centre, improving coordination between agencies, and holding social media firms accountable for fraud. The debate highlighted the severe emotional and financial impact of fraud, something which other governments want to put a stop to as well. 

Fraud prevention in Singapore

Across the world in Singapore, the country’s Ministry of Home Affairs has proposed a Protection from Scams Bill to empower police to issue restriction orders (ROs) that allow banks to temporarily block transactions for individuals at risk of online scams who refuse to believe they are being deceived. Despite existing safeguards like account "kill-switches," scams involving victims voluntarily transferring money remain prevalent, and the new bill targets digital and telecommunication scams, enabling police to halt money transfers and suspend credit facilities. 

The ROs will last 28 days, renewable if necessary, and public consultation on the bill is open until September 30, 2024. The bill may seem far-reaching, and seems unlikely to be one that a UK, EU or US regulator would dare to replicate, but it can’t be said that banks would be against such a proposal. For example, in 2023, the UK’s Supreme Court handed out a judgement in favour of  Barclays Bank after an elderly couple, the Phillipps, lost £7,00,000 to bank accounts in the United Arab Emirates after being defrauded. The new APP fraud reimbursement rules in the UK wouldn’t have helped the couple’s case, but it does show how difficult it is for payment service providers to persuade customers that they are being defrauded. 

Fraud prevention in California

In California, meanwhile, Senate Bill 278 (SB 278) aims to strengthen protections against financial abuse of the elderly and vulnerable, and has passed the state legislature. The bill holds financial institutions accountable if they suspect fraud but fail to act, closing a loophole in existing laws, and it incentivises banks to implement safeguards, while introducing protocols like an emergency financial contact program and mandatory delays in suspicious transactions. The bill, which was popular with elder rights advocates, now awaits Governor Newsom’s signature and will take effect on January 1, 2026 if he signs it into law.

Fraud prevention in Australia

And down under, new draft legislation aimed at introducing a mandatory Scams Prevention Framework has been proposed by the Australian government, and has so far garnered applause from consumer and banking groups alike. The legislation, open for public comment until October 4, 2024, will initially focus on banks, telecom companies, and digital platforms, such as social media and instant messaging services, and sets mandatory standards for scam prevention, detection, and response, with penalties of up to $50m for non-compliance.

The framework outlines both overarching principles for all sectors and specific obligations for individual industries. For example, banks must verify payee details before transferring funds, while social media platforms are required to remove scam content within 24 hours, and key obligations also include regular staff training on scam prevention and reporting scam intelligence to regulators.

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These diverse policy initiatives show that the fraud epidemic is keeping politicians and policymakers awake at night and has prompted them to become far more interventionist. More interventionist and robust moves to rein in the fraud problem will no doubt be welcomed by some, and it is clear with Singapore for example, that the regulator is willing to compromise personal freedoms to stop consumers acting naively. 

The question now is, which parts of the payments ecosystem will be most heavily impacted globally by policymakers bids to prevent fraud and protect consumers? 

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