RegTech and InsurTech Team Up to Tackle the UK’s £459m APP Fraud Challenge

Elmore Insurance Brokers (Elmore) and Green Swan Compliance announce the development of an Authorised Push Payment (APP) Fraud Reimbursement Insurance solution to qualifying UK banks, Payment Service Providers (PSPs), E-Money Institutions (EMIs), and Authorised Payments Institutions (APIs).

Elmore is the first Lloyd’s broker to offer insurance coverage against APP Fraud. Partnering with risk and compliance experts Green Swan Compliance, Elmore has developed an innovative solution to support qualifying UK financial institutions processing Faster Payments. Insurance to help firms mitigate risk and protect balance sheets from any adverse effects from the new regulations.

“APP fraud occurs when people are manipulated into making real-time payments to fraudsters,” said Elmore CEO, Simon Gilbert. “It has quickly become one of the most significant types of fraud on UK Faster Payments, which is a service that allows UK sterling payments to be made electronically between banks instantly or within two hours. According to UK Finance’s 2024 annual fraud report, APP fraud losses amounted to £459.7million in 2023.

From October 7 this year, UK payment service providers must reimburse victims of APP fraud following new regulations by the government’s payment regulator. Although introducing a mandatory reimbursement framework is designed to improve fraud prevention and motivate firms to protect customers, it is highly likely to create significant new financial risks and have a direct impact on many firms’ P&L with potential consequences.

Reimbursement rules require all PSPs, sending payments over Faster Payments, to reimburse their customers who become victims of APP fraud (unless gross negligence can be proved) within five business days of the APP fraud being reported. The new rules are a potential minefield for UK financial institutions and particularly small to medium-sized firms, who may struggle to bear the financial impact of such reimbursements.

‘’All Financial Institutions that have an APP exposure are going to need to look at the insurance option for mitigating this new risk. There are unintended consequences from the APP reimbursement regulations that have serious implications for many firms. The EMI industry, and especially those with Agents and Distributors, all face new issues under the new APP fraud rules,” said Leven Li, Co-Founder of Green Swan.

The application and supervision process will be supported by Green Swan’s digital compliance services.