Name checks will soon be automatically carried out when UK bank customers send money to other people, in a bid to halt a rising tide of bank transfer fraud.
Banks will soon have to carry out name checks on money transfers to help stamp out fraud and prevent payments from being sent to the wrong account.
A new 'Confirmation of Payee' service will force lenders to cross-reference names with sort codes and account numbers to ensure funds are being sent to the right recipient.
Under current rules, when a person carries out an electronic bank transfer, the recipient's name isn't checked against the other account details provided.
This means a small error could go unnoticed, and result in the money being sent to the wrong bank account.
And in many cases, it's contributing to fraud, with criminals posing as people to trick others into sending money to the wrong places.
Under new rules, lenders will have the powers to check whether all details match up.
The Payment Systems Regulator (PSR) said the UK's six biggest banking groups, which are involved in around 90% of bank transfers, will have the measures in place by 2020.
From December this year, banks will be able to liaise with each other on money transfers to ensure the details are correct.
And from 31 March 2020, banks will have to tell the payer if the payment failed due to a naming error.
The banks involved in the initiative will include Lloyds Group, Barclays Group, HSBC Group, Royal Bank of Scotland Group, Santander Group and Nationwide Building Society.
Confirmation of payee works by making sure the name of the account someone is sending money to matches the name they have entered.
Alerts will notify the payer when there has not been a match - meaning corrections can be made before the payment is sent rather than people trying to claw the money back after the cash has been transferred.
As well as preventing simple mistakes, it should help in the fight against authorised push payment (APP) scams, where people are tricked by a fraudster into sending money to the wrong account.
Such scams often involve criminals posing as legitimate companies.
Earlier this year, a new voluntary industry code was put in place, setting out how victims of APP scams can be reimbursed in certain circumstances.
Louise Buckley, co-managing director of the PSR, said: "Today marks another significant step to making sure there are greater protections against APP scams.
We have been committed to getting the right result for everyone - from driving forward the successful introduction of the voluntary industry code which came into force in May, to the implementation of confirmation of payee.
"UK banks have a clear deadline by which they need to have the systems in place to make sure that people are better protected from this devastating crime, and that it stops those payments from being made in the first place.
"We will be monitoring this closely to make sure it is implemented effectively."
Consumer group Which? described the move as 'love overdue', but criticised its lack of enforcement.
"Delays to the introduction of this vital name-check security have already resulted in thousands of customers losing life-changing sums of money to bank transfer scams – so this announcement is long overdue," Which? head of money, Gareth Shaw said.
"Confirmation of payee is essential in the fight to wipe out this type of fraud, and could quickly cut the amount of money lost overnight. It’s now vital that all banks, not just those covered by this direction, do the right thing by their customers and implement this measure. The regulator must also ensure this time frame does not slip again – consumers can not afford any further delays."
Source: The Mirror