Fraud Management & Cybercrime , Geo Focus: The United Kingdom , Geo-Specific

Should UK Cut Fraud Reimbursement Cap for Smaller Banks?

The U.K. Payment Systems Regulator wants to reduce the reimbursement cap on authorized push payment fraud to ease the burden on smaller banks. That's unacceptable and would undermine the financial system's integrity, said Jonathan Frost, board member at the Stop Scams Alliance.

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"If we're saying that you're operating in a regulated market and, by virtue of your size, the efficacy of your controls should be allowed to be deficient, I'm not comfortable with that," Frost said. "You need a level playing field in terms of the efficacy of people's controls when it comes to fraud and financial crime."

The financial consequences of control failures often fall disproportionately on sending payment service providers, or PSPs. Consumers typically hold their own financial institutions accountable, which means sending PSPs will bear the brunt of the costs, regardless of where the failure occurred.

Under the proposal, the Financial Ombudsman Service would have the authority to award up to 430,000 pounds - approximately $533,200 - in compensation, which is far higher than the Payment Systems Regulator's proposed cap of 85,000 pounds - approximately $105,400.

In this video interview with Information Security Media Group, Frost also discussed:

• The need for a level playing field in financial controls, regardless of bank size;
• The potential reduction of reimbursement caps and its implications;
• How control failures disproportionately affect sending PSPs.

In addition to helping lead the Stop Scams Alliance, Frost acts as an independent consultant to several organizations that seek to reduce fraud and cybersecurity risk. He previously worked for the City of London Police, where he led the development of the U.K.'s National Fraud and Cybercrime Reporting system.