APP Fraud: Risks in Real-Time Payments

Authorised Push Payment (APP) fraud occurs when victims are tricked into willingly transferring money to fraudulent accounts. Unlike unauthorised fraud where criminals hack systems, APP fraud relies on social engineering tactics to manipulate individuals or businesses into making payments under false pretences.

APP fraud in banking refers to scams where fraudsters deceive customers into authorising payments to fake accounts. Banks face challenges in detecting this fraud because the payment is authorised by the customer, making real-time monitoring, behavioural analytics, and anomaly detection essential tools for identifying risks.

An example of APP fraud includes receiving a fake call from someone impersonating your bank, claiming your account is at risk and asking you to transfer funds to a “safe” account. Another common scenario is a fraudulent supplier email requesting payment to a new account due to "urgent changes."

While APP fraud relies on victims authorising payments voluntarily after being deceived, account takeover involves criminals illegally accessing a victim’s account to initiate transactions. APP fraud exploits trust and urgency, while account takeover bypasses the victim entirely.

Fraudsters initiate contact via phishing emails, spoofed calls, or fake messages designed to impersonate trusted entities such as banks or suppliers. They manipulate trust, often creating urgency, and instruct victims to transfer money to fraudulent accounts, which are quickly emptied or rerouted across several channels.

Banks can detect APP fraud through real-time transaction monitoring that flags atypical payment patterns, behavioural analytics that assess user activity, and device fingerprinting to match known user profiles. Advanced anomaly detection ensures quicker identification of suspicious transactions.

Financial institutions employ tools such as behavioural analytics, anomaly detection software, risk scoring systems, and real-time transaction monitoring frameworks. Additional measures include payee risk screening and database verification systems to ensure account authenticity.

APP fraud prevention refers to measures that mitigate risks of fraudulent transactions. These include enforcing dual payment approvals, verifying account changes independently, employee awareness training against phishing scams, and implementing advanced monitoring technologies to identify suspicious activities.

Businesses can reduce APP fraud risk by enforcing dual-approval processes for all payments, verifying supplier account changes independently, providing phishing awareness training to staff, and segregating financial duties. Employing comprehensive payment monitoring systems also strengthens fraud defences.

Consumers can avoid APP fraud by never sharing sensitive information like OTPs or passwords, verifying the legitimacy of payment instructions directly with organisations through separate channels, enabling transaction alerts, and immediately reporting suspicious activities to their banks.

If you fall victim to APP fraud, contact your bank immediately to report the incident, freeze suspicious transactions, and begin the reimbursement claims process. Work with law enforcement if necessary and provide supporting evidence like phishing emails or suspicious calls.

Victims of APP fraud in the UK may be reimbursed under the Contingent Reimbursement Model Code, provided they acted responsibly and weren’t negligent in protecting their funds. Banks follow specific regulatory guidelines to assess the validity of compensation claims.

APP fraud compensation involves financial reimbursement provided to victims by banks who conclude they qualify under the UK regulations. Factors such as cooperation during investigations and adherence to best practices, like suspicion reporting, influence compensation eligibility.

APP fraud losses are rising due to increased real-time payments, advanced social engineering scams, and the growing reliance on digital financial transactions. Fraudsters exploit trust and urgency via sophisticated means like phishing and impersonation tactics.

Transaction monitoring systems continuously assess payments for irregularities using behavioural analytics and risk scoring. They identify anomalies in transaction amounts, timing, and user behaviour, enabling banks to detect and block potential APP fraud in real time.