Payments regulatory news, April 2021 # 2

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Recent regulatory developments focussed on the payments sector. Reports on a BoE update on omnibus accounts for payment systems operators and prefunding accounts, and an LSB blog on APP fraud. See also our Financial institutions general regulatory news of broad relevance in the Related Materials links.

Contents

  • Omnibus accounts for payment systems operators and prefunding accounts: BoE update
  • APP fraud: LSB blog

Omnibus accounts for payment systems operators and prefunding accounts: BoE update

The Bank of England (BoE) has updated its webpage on payment and settlement to add the following new sections to the information provided in relation to accessing and using accounts in the BoE's real-time gross settlement (RTGS) to hold funds and settle payments:

  • Omnibus accounts for payment systems operators: omnibus accounts can be used by a recognised payment system operator to pool participant funds. This allows the operator to fully fund wholesale settlement, on their platform, with central bank money and to mitigate credit and settlement risk. The BoE explains that the funds in the account can be held both during and outside of RTGS operating hours. Balances are remunerated at Bank Rate. To directly participate in the relevant payment system using an omnibus account, an organisation must hold a reserves account. The BoE has published an access policy for BoE omnibus accounts, explaining the eligibility requirements in detail.

The BoE adds that a payment system operator must be recognised under the Banking Act 2009 to be eligible to hold an omnibus account. Organisations interested in applying for an omnibus account should contact the BoE. Payment system operators that are not recognised should discuss recognition with HM Treasury.

  • Prefunding accounts: the BoE has created special accounts for direct settlement participants to hold funds to cover the maximum possible net debit positions they could reach in certain retail payment systems. For organisations holding a reserves account, these balances form part of their overall reserves balance and are remunerated at the same rate. Prefunding accounts are also available to settlement account holders including non-bank payment service providers. If a participant defaults, the cash set aside can be used to complete settlement. This eliminates credit risk between direct participants. These accounts are provided to direct settlement participants in Bacs and Faster Payments and the Image Clearing System for cheques.

The BoE explains it is not possible to apply directly to it for a prefunding account. Applications must be via Pay.UK, as the operator of Bacs, Faster Payments and the Image Clearing System.

APP fraud: LSB blog

The Lending Standards Board (LSB) has published a blog on the power of prevention in the fight against authorised push payment (APP) fraud. The LSB explains that APP fraud has reached unprecedented levels in the UK as criminal organisations have adapted to, and capitalised on, the impact of COVID-19 over the last year.

Customers of firms signed up to the Contingent Reimbursement Model Code (CRM Code) that have fallen victim to an APP scam (through no fault of their own) should expect to be reimbursed in full and should also receive supportive aftercare to help prevent them falling victim again. However, customers should expect to be protected against APP fraud in the first place. While reimbursement levels are an important metric, the LSB considers that it is critical the industry considers prevention and detection measures as well. It elaborates on these in the blog.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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