The UK government recently announced new laws which will allow banks to extend investigations of suspected fraudulent payments from the current 24-hour maximum delay to up to 72 hours.

Announcing the legislation, which came into force at the end of October, Tulip Siddiq, Economic Secretary to the Treasury, said: “Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people.

“We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave.”

As a lawyer who concentrates on the investigation and litigation of cross-border international fraud, I welcome this development.

Prevalence of fraud in the UK

Fraud now accounts for over a third of all crime perpetrated in England and Wales, making it the most prevalent form of crime in the country (according to the UK Treasury). And it is increasingly transnational.

Given my professional background, I am very aware of the investigative problems caused when money is transferred from one jurisdiction to another.

Because firms like ours operate primarily in a civil law environment, we can react dynamically to movements of assets, often much more expeditiously than our friends in law enforcement.

The ex-detectives who now work in my firm’s Investigations Unit tell countless tales of frustration over such delays. Letters of Request often ambled their way through months of diplomatic processes, leaving the track to go cold and assets to be whisked away by criminals.

We can cut through red tape much more quickly and effectively than some of our law enforcement contemporaries, and our clients can often be reunited with at least a percentage of what they have lost. This is the advantage we in the private sector have over our neighbors in the public sector.

But a lot of the payments being targeted by the new law in the UK are smaller amounts that would never form viable recoveries for law firms like ours. However, these smaller payments are often made and transferred unwittingly by innocent “money mules”, and can now at least be held so that calls and research can be conducted to identify if the transaction is connected to a potential scam.

Underreporting fraud

As a crime fraud is notoriously underreported. The likely level of fraud in the UK is many times higher than that recorded by government statisticians. This makes any attempt to curtail the activities of crooks all the more important. Thus these new measures may prove extremely consequential for victims, even if the individual sums themselves seem “small”.

Authorised Push Payment fraud (APP), including romance and investment scams, reached £341m ($452m) in 2023. Thankfully this is down 12% since 2022, due perhaps in part to awareness campaigns. We must maintain and, where possible, expand this level of awareness.

The problem, though, is that attempted frauds are rarely reported, so the value for money spent on raising awareness and education is sometimes difficult to measure. In a similar vein, a police officer might never know how many crimes they have prevented merely by walking down a street.

Conflicting perspectives

From a lawyer’s perspective, the planned new rules may also generate conflicting perspectives. For example, the new measures will apply where a bank has “reasonable” grounds to suspect a payment is fraudulent and needs more time to investigate.

The word “reasonable” has a broad meaning and applying the criteria in deciding whether to delay payments will undoubtedly lead to conflicts between the bank and its customer when the payment is legitimate. This could become a customer relations nightmare if a bank gets it wrong.

I note that banks will be required to compensate customers for any interest or late payment fees they incur as a result of delays.

In my view, anything we can do to protect not just an asset, but also the welfare of victims, is worthwhile. As Ben Donaldson, UK Finance’s managing director for economic crime, commented: “This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals.”

As with all these initiatives, there are likely to be a few bumps along the road, including some irate customers who feel that they are getting bogged down in unnecessary red tape. I feel a degree of sympathy for the banks, but overall the new law seems a necessary and sensible step in the ever-expanding battle against the fraudsters.

Martin Kenney is head of firm at Martin Kenney & Co (MKS), a litigation practice in the BVI focused on asset recovery and multi-jurisdictional fraud cases.