From next year, payee names will be checked when making bank transfers in order to ensure that funds are being sent to the correct recipient.
Currently, only the sort code and account number are checked when making a transfer, something which has been exploited by fraudsters to trick people into transferring tens of thousands of pounds into the wrong account.
In cases where such fraud has occurred, banks have often been unable or unwilling to retrieve the funds or to accept any liability.
Under the plans unveiled recently by Pay.UK, the UK’s payment operator, the person making the payment will need to include a payee name alongside the sort code and account number from July 2019.
If the correct name is entered, the funds will be transferred. If a name that is similar to the correct name is entered, the correct name will be displayed for the account holder to check. If an entirely incorrect name is entered, the account holder will be referred back to their intended payee.
Paul Horlock, Chief Executive at Pay.UK said: “Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong postcode.
“Even if you have used the correct name, it won’t reach the intended destination – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account.
“Confirmation of Payee will let you check you have the correct name for the person or business you are paying, giving better protection against certain types of fraud, and helping to stop accidental mistakes too.”
In the first six months of this year, £145 million was stolen from account holders through scams relating to account numbers.