UK's LSB Upgrades CRM Code to Further Protect Customers from APP Scams

The Lending Standards Board (LSB) is taking hardline measures to protect against Authorised Push Payment scams, or APP scams.

The LSB has further updated the CRM Code (Contingent Reimbursement Model Code) to require signatory companies accepting such payments to play a greater role in fraud prevention.

By December 2023, these companies will be required to monitor payments to identify suspicious inbound payments and accounts that fraudsters may be using to help companies stop the flow of fraud-related funds and recover the funds lost by defrauded customers.

In the UK, APP scam is a common form of fraud in which scammers manipulate victims into transferring money to them. For example, in investment scams, victims are defrauded by transferring funds for non-existent investment schemes. And in a love scam, the scammer tricks the victim into thinking he/she is in a relationship and lures he/she to transfer money.

Before 2019, banks almost did not reimburse those who were scammed for the full deposit, because the victim authorized the payment. 2019's CRM code was designed to be a protective measure against APP scams.

Emma Lovell, Chief Executive of the LSB, said: "It is essential that firms do all they can to stop criminals from opening bank accounts and using their services to receive scam payments. Strengthening the Code's provisions means putting in place another tripwire for fraudsters looking to steal people's savings – not to mention the money needed for essential living costs."

LSB has also agreed on a Memorandum of Understanding with the Payments Systems Regulator (PSR) to reaffirm the cooperation and communication between the two organizations. A consultation is currently underway on a proposal to provide mandatory reimbursement for victims of fraud where more than £100 has been stolen.

Ms Lovell comments: "We share the PSR’s drive to ensure more victims are reimbursed where they are not to blame for the success of a scam, but are eager to ensure that fraud detection and prevention continue to be prioritised alongside reimbursement."

Lovell believes that even if the victims are compensated, this is not a good outcome. Because the victims will feel the aftermath, and the criminals who profited from the illegal acts still exist in the society.

"We strongly believe that firms should continue to sign up and adhere to the CRM Code. Scammers aren’t slowing down, and so we cannot take our eye off the ball. Only by stopping scams can customers truly be protected. Maintaining an industry code focused on preventing and detecting scams ensures firms have the tools to stop more scams and demonstrates their commitment to good customer outcomes and protections."