Crown Dependencies issue APP fraud framework

The regulators in Jersey, Guernsey and the Isle of Man have jointly published a high-level proposal for a Crown Dependencies authorised push payment (APP) fraud framework.  APP fraud involves tricking a person into sending money under false pretences, and criminals often pose as well-known legitimate businesses or government bodies as part of their deception.

The regulators are seeking to establish a coordinated and broadly consistent approach to APP fraud across the Crown Dependencies, while allowing for certain jurisdiction-specific differences where necessary. This will ensure that banks operating across the Crown Dependencies are able to employ the same tools to combat APP fraud. 

Scope of APP fraud still being refined

Expected payment scope

Prevention and customer protection measures

The regulators are considering enhanced expectations regarding:

• Fraud prevention and detection;
• Systems and controls;
• Customer education;
• Processes for handling fraud reports; and
• Protection of vulnerable customers.

Reimbursement framework

A key feature under consideration is a reimbursement regime balancing customer protection with customer responsibility. Issues being examined include:

• Eligibility criteria for claims;
• Reimbursement caps;
• Circumstances where reimbursement may be reduced or declined; and
• The impact of gross negligence, customer responsibility and vulnerability. 

The regulators have specifically indicated that customer vulnerability should be an important factor when firms assess claims.

No inter-bank cost sharing (for now)

The regulators considered a model under which reimbursement costs would be shared between sending and receiving banks. Their current view is that such a model would create significant operational complexity and should not be the starting point for the regime. This is a point of divergence with the UK and EU positions, where such costs are currently shared between sending and receiving payment providers, with a default split of 50:50 coupled with an overall cap on the reimbursement. 

What happens next?

The regulators will engage with industry bodies, governments and ombudsman services to test the proposals, identify operational issues and refine the framework before publishing a more detailed consultation. Formal working arrangements will also be established to support ongoing development of the regime.

Our thoughts

Many banks and payment providers in the Channel Islands already have in place systems and controls for to the detection and prevention of customer fraud. These measures include payee verification tools, such as Confirmation of Payee-style checks, and the introduction of additional friction points when customers seek to set up a new payee or initiate a payment. For example, customers may be required to confirm payment details multiple times, respond to tailored fraud warnings, or use services that check whether the account details entered correspond with those held for the intended recipient.

That said, the development of an APP fraud framework cannot be viewed in isolation from the broader payments ecosystem. In particular, the absence of certain preventative tools available in other jurisdictions, such as Confirmation of Payee, may become increasingly relevant as expectations regarding APP fraud prevention, customer protection and reimbursement continue to evolve. Measures that help consumers verify payment details before funds are transferred are likely to form an important part of the wider discussion around effective fraud prevention in the Crown Dependencies

As highlighted in its 2025 Annual Report, the Channel Islands Financial Ombudsman (CIFO) identified fraud as the most impactful source of consumer complaints during the year and the most significant issue it has confronted this decade. Against a backdrop of limited legislative and regulatory guidance, CIFO has developed a well-established approach to assessing APP fraud complaints, and that approach has clearly informed the new framework. As a result, the framework should not come as a surprise to banks and payment service providers, many of which will already be familiar with the principles underpinning it through their interactions with CIFO when handling customer complaints. Its adoption is therefore likely to provide a greater degree of regulatory certainty and consistency in the treatment of APP fraud cases, while clarifying the standards that financial institutions are expected to meet when responding to affected customers.

Banks and other payment service providers operating in the Crown Dependencies should monitor developments closely and begin considering the operational, compliance and resourcing implications of the proposed framework. While further consultation and refinement is expected, the direction of travel is clear: firms will be expected to maintain effective systems and controls designed to prevent, detect and respond to APP fraud.

About our Channel Islands Regulatory & Risk Advisory team

Our Channel Islands' Regulatory & Risk Advisory team has a dedicated team of regulatory experts spanning all practice areas who regularly advise on all aspects of Guernsey and Jersey regulation and tax, including financial services, AML, sanctions, data protection, consumer protection, competition, tax (including Pillar Two), economic substance, FATCA and the CRS. Our team can also provide training to staff on a broad range of topics.