Bank transfers may be delayed for four days to investigate fraud

Banks will have the power to pause payments for up to four days to give them more time to investigate fraud, the government said.

Currently, transfers must be processed or declined before the end of the next business day, but the new law allows an extension of a further three days.

For years, banks had to have reasonable grounds to suspect fraud before they could investigate, but they also faced pressure from customers who wanted payments made immediately.

The long-proposed new regulations will come into effect at the end of October – later than originally planned.

Fraud is the most common crime in the country, accounting for a third of all crimes in England and Wales.

Criminals have stolen billions of pounds through romance scams or by pretending to be a real trader to trick victims into transferring money.

“We need to better protect these people, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell of scammers,” said Tulip Siddiq, the economic secretary of the Finance Ministry.

Banks have been lobbying for permission to take longer to agree to payments so they can investigate suspicious transfers.

The new law gives them time to investigate unusual spending patterns, contact a customer and conduct further investigation before transferring the money.

The previous government’s bill proposed giving banks the new powers before October 7, but now they will come into effect from the end of the month.

UK Finance, the banking trade body, has welcomed the new rules. Consumer groups say the powers must be used in a careful and targeted manner.

The changes could cause some frustration among account holders who have become accustomed to bank transfers made online or through a mobile app being processed almost immediately.

Banks will have to inform customers when a payment is delayed, explain what the customer needs to do to unblock the payment and pay compensation if the delay imposes additional costs on the customer.

The rules will come into effect a few weeks after the date introduction of a stricter mandatory scheme with fraud victims set to receive up to £85,000 in refunds from banks within five days of an authorized push payment fraud.

The maximum compensation has been reduced from a previous proposal of £415,000.