New measure to preventing bank transfer faud and allow the transfer of money to friends and family in a simple and safety way with the "confirmation of payee".
Due to the new fraud rules that came into force today, six major banks, including Barclays and HSBC, have introduced a new security measure to control money transfer. This system is known as “confirmation payee “.
The new bank transfer rule
The new system is made to clamp down on fraud which makes the UK economy cost more than £130billion a year. It was first introduced in October 2018 and became law on June 30.
Before this new system, usually you have to submit the recipient’s account number and sort code.
You can also send over their name, though in the past, banks haven’t been legally obliged to verify this. This loophole makes fraudsters able to pose as other people to trick customers into sending money to other accounts.
But from June 30, you’ll be able to ask your bank to check before sending out any money. They’ll be able to check the name on the account if it matches the name you’re sending money to – and if it doesn’t, they will notify you. It means you can check who your cash is really going to, and stop the payment if necessary. The June rules will apply to faster payments and CHAPS. Then Bacs payments, which are often used by employers to pay staff, will be added later in the year.
First Direct, Halifax, Lloyds, RBS including NatWest, Nationwide and Santander will introduce it on June 30. Whilst TSB said they will use it by October 2020. Importantly, you’ll only be able to request the safety check if both banks are on the scheme. It also won’t apply on international payments.
Operation of the new system
You will enter the payee’s sort code, account number and a payment reference as standard. Then there is the option to submit their name which will have to be exactly as it appears on the card. Then the bank will ask you about the type of account you are paying, either personal or business. The bank will check the records of the payee’s bank account to see if the name matches.
There are three following responses after the checking. First, if you used the right account name, you will get confirmation that the details match, and can go ahead with the payment. The second response, if you used a similar name to the account holder, you will be told 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.
And the last response is if you have entered the wrong name for the account holder you will be told the details do not match and advised to contact the person or organisation you are trying to pay.
For phone payment, they will tell toy whether it’s a match or not during the call. Online, you will be given a notification such as ‘yes, match’. The decision is still yours with whatever happens but the risks are made clear if you choose to go ahead after receiving a non-match.