HM Treasury has said it will commission a review of departments’ use of anti-fraud measures that help ensure payments are sent to the intended recipients – a practice that is mandatory for some types of payment in the banking sector.
The “confirmation of payee” process – or CoP for short – was introduced in 2020. It helps to prevent fraud and misdirected payments by checking the receiving account details for a proposed payment against bank records and a central register.
At a recent Public Accounts Committee hearing exploring government’s use of data-analytics to detect fraud and error, MPs asked why CoP is not universally used by government departments to verify the identity of payees.
In a response published yesterday – but dated 27 February – HM Treasury director general for public spending Conrad Smewing said departmental accounting officers are responsible for deciding which anti-fraud measures they procure.
But he told MPs that a review would be conducted to explore departments’ current use of CoP and whether new guidance may be required.
“While CoP-type checks are used in some parts of government, for example in certain transactions within HMRC, the extent of its use across government is not quantified,” he said.
“To address this and in recognition of the potential benefits of enhanced payee validation I will instruct the Government Finance Function, supported by Public Sector Fraud Authority, to lead a short cross-government stocktake of current departmental practices to assess where additional guidance or standards on payee validation and related controls may be warranted.”
Smewing said provision of CoP is a must for all banks and building societies offering Faster Payments and CHAPS payments – the acronym for Clearing House Automated Payment System.
However he said the Bankers’ Automated Clearing System (BACS) is the most widely used payment method in government, accounting for over 85% of the value of payments made to recipients outside central government, including payroll and benefits.
Smewing said the Treasury’s Managing Public Money guidance prescribes BACS as the preferred government payment method because of its “strong value for money, suitability for high‑volume planned disbursements, and the important role it plays in supporting effective cash and liquidity management”.
Last month, the Payment Systems Regulator announced it had fined Bank of Ireland UK £3.7m for failing to implement CoP for its customers by the required deadline.
It said BOIUK had missed the deadline by 14 months and that the safeguard had not been applied to transactions involving more than 1 million new payees, with payments totalling approximately £7bn not covered.
At the time PSR managing director David Geale described CoP as “a vital tool to combat fraud and misdirected payments, giving people confidence that their money is going exactly where they intend”.
In his letter, Smewing did not give an anticipated timeline for the review of departments’ use of CoP. However, he pledged to update MPs with its findings.