Author: Nicola Sharp
26 March 2020
2 min read
Nicola Sharp of Rahman Ravelli details the extension of the voluntary code on APP fraud – and the scope for using freezing orders when such fraud is perpetrated.
Banks have agreed to another extension to the voluntary code to refund those who have suffered push payment fraud.
The code will now be in operation until December 2020, as talks continue for a long-term plan to address the issue. Under the scheme, customers who lose money through authorised push payment (APP) fraud can claim compensation.
Before the banks took their decision, the scheme had been set to expire at the end of March. This is the second time the voluntary code has been extended. The latest extension reflects the difficulty banks have faced in trying to agree on a long-term arrangement on how to sustainably fund the system to protect customers.
Customers falling victim to APP fraud before the end of 2020 will now be able to claim a refund from their bank – but only if their bank is signed up to the code and the customer has listened to relevant advice from the bank previously.
Banks, regulators, the retail payment authority Pay.UK and the government are to continue discussions on precisely what form a permanent system should take.
Barclays, Co-op, Smile, HSBC, First Direct, M&S Bank, Lloyds, Halifax, Bank of Scotland, Intelligent Finance, Metro Bank, Royal Bank of Scotland, NatWest, Ulster Bank, Nationwide, Santander, Cahoot, Cater Allen Limited and Starling Bank are all current signatories to the voluntary code. TSB devised its own Fraud Refund Guarantee a year ago.
It should not be forgotten that there is always the potential to use a freezing order to prevent disposal of any assets acquired through such fraud.
In World Proteins Kft v Persons Unknown , the company had push payment fraud perpetrated against it. While it was able to recall a transfer for €1.5M it was not able to do this for a further €500,000 and so applied for a freezing injunction for the bank accounts of those that committed the fraud. Following the case of CMOC v Persons Unknown , the court granted an urgent interim freezing injunction. The company had met the elements required for the freezing injunction - there was an obvious fraud, an arguable case against the person unknown and an obvious and real risk of dissipation of the money.
The account, which still contained €350,000, was frozen, disclosure of bank records led to the identification of the person perpetrating the fraud and the High Court granted default judgment in the claimant’s favour. All sums held by the respondent as a result of his fraud had to be returned to the claimant – as a direct result of the freezing of the assets.
Taking immediate steps under civil law to trace and preserve stolen assets will often be the most effective way of regaining what has been taken.
This article was also featured on Lexology.com.
Nicola is known for her fraud, civil recovery and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.