Bank transfers may be delayed for up to four days for fraud investigation

The government said banks would have the power to stop payments for four days to give them more time to investigate fraud.

Currently, transfers must be processed or rejected by the end of the next business day, but the new law will allow an additional three-day extension.

For years, banks needed to have reasonable grounds to suspect fraud before being able to investigate but also faced pressure from customers who wanted immediate payments.

The long-proposed new regulations will take effect at the end of October – later than originally planned.

Fraud is the most common crime in the country, accounting for a third of all crimes in England and Wales.

Criminals have stolen billions of pounds through romance scams or tricked victims into transferring money by impersonating a genuine businessman.

Banks have lobbied for permission to take longer to agree on payments, to allow them to investigate suspicious transfers.

The new law will give them time to look for unusual spending patterns, contact the customer and conduct further investigations before transferring money.

Ben Donaldson, managing director of economic crime at UK Finance, which represents the banking industry, believes the new law will be used “fairly narrowly”.

“It's really relevant in investment fraud and romance fraud where the victim is psychologically manipulated,” he told the BBC's Today programme.

Some groups say the powers should be used carefully and targeted.

The Society of Licensed Conveyancers said it was “deeply concerned” that the four-day freeze could be disastrous for people who are buying a home and need to move large sums of money quickly.

But Mr Donaldson said: “We will only use this power where we have reasonable grounds to suspect it is a fraud.”

Banks must inform customers when payments are delayed, explain what the customer needs to do to unblock the payment and compensate the customer with additional charges due to the delay.

This rule will come into force after a few weeks Introduction of a strict mandatory scheme It sees victims of fraud receive up to £85,000 in refunds from banks within five days of approved push payment scams.

The maximum compensation has been reduced from the previous offer of £415,000.