Fines and Penalties for App Scams

App scams, particularly Authorised Push Payment (APP) scams, have become a significant concern in recent years. These scams involve fraudsters tricking individuals or businesses into authorizing payments to accounts controlled by the criminals. The consequences for victims can be devastating, both financially and emotionally. As a law firm specializing in federal and financial regulations, we at Spodek Law Group are committed to helping our clients navigate the complexities of these scams and understand the legal repercussions involved.

Understanding APP Scams

APP scams occur when someone is deceived into sending money to a fraudster posing as a legitimate payee. These scams can take various forms, such as:

• Malicious Payee Scams: Trick someone into purchasing non-existent goods or services.
• Malicious Redirection Scams: Fraudsters impersonate bank staff or other trusted entities to redirect funds to their accounts.

In 2023 alone, £239.3 million was lost to APP scams in the UK, highlighting the scale of this issue.

Legal Framework and Regulatory Actions

The UK Government and the Payment Systems Regulator (PSR) have taken significant steps to combat APP scams. The Financial Services and Markets Bill, which received Royal Assent in June 2023, mandates reimbursement for victims of APP scams. This legislation empowers the PSR to enforce a liability framework for APP scams, ensuring that victims are reimbursed promptly.

Fines and Penalties for Non-Compliance

The PSR has the authority to impose financial penalties on firms that fail to comply with its regulations. These penalties are designed to disincentivize non-compliance and ensure that firms take necessary measures to prevent APP scams. Key aspects of the PSR's updated penalty statement include:

• Duration of Compliance Failure: The length of time a firm fails to comply with regulations is considered when calculating penalties.
• Revenue Consideration: The firm's revenue is taken into account to ensure that penalties are proportionate.
• Senior Management Accountability: Clarification on what constitutes senior management and their role in compliance failures.
• Deliberateness and Recklessness: Enhanced clarity on identifying deliberate or reckless non-compliance.

Case Law and Judicial Decisions

Recent judicial decisions have also impacted the liability of banks in APP scams. For instance, the Court of Appeal's decision in Philipp v Barclays Bank plc extended the Quincecare duty of care to instances of APP fraud. This means that banks could be held liable if they suspected or should have suspected that their customer was being scammed, even if the payment was authorized.

Practical Implications for Firms

Firms must take proactive measures to prevent APP scams and comply with regulatory requirements. These measures include:

• Implementing Confirmation of Payee (CoP): A name-checking service to verify the recipient's details before making a payment.
• Enhanced Fraud Detection Systems: Utilizing advanced technology to detect and prevent fraudulent transactions.
• Customer Education: Informing customers about the risks of APP scams and how to protect themselves.

Conclusion

APP scams present a significant challenge for both individuals and financial institutions. With stringent regulations and substantial penalties for non-compliance, it is crucial for firms to take proactive steps to prevent these scams. At Spodek Law Group, we are dedicated to helping our clients understand and navigate these complex legal landscapes. If you need assistance or have been affected by an APP scam, contact us at 212-300-5196 for expert legal guidance. For more detailed information on APP scams and the associated legal framework, please refer to the Payment Systems Regulator's official documents and recent case law developments.