Identity and security checks when sending: ID, verification and held payments

Every firm that moves money for you, whether a bank, a specialist transfer service or an app, is required by law to check who you are and, in some cases, where your money has come from. NS&I, for example, states plainly that it is "required by law to check your identity and address" when a customer applies to invest or registers for its online and phone service, and possibly at other times to keep records up to date¹. The same principle sits behind every bank account and payment service: the firm must be satisfied it knows its customer before it handles their money.

That is why a money transfer needs ID, and why the checks can feel intrusive. It is not the firm being awkward. Identity checks protect you as much as the firm: they make it harder for someone else to open an account or send money in your name, and they underpin the anti-fraud and anti-money-laundering rules that apply across UK financial services. This page explains what ID firms ask for, why a payment can be held while checks are done, how your money is protected while it sits with a transfer firm, and what to do if a payment is blocked, a complaint is needed or the firm fails.

Why money transfer services ask for ID

The short answer is that the law requires it. Firms that hold or move money must verify who their customers are, and the checks do not stop once an account is open. NS&I, for instance, says it checks identity when a customer applies to invest or registers for online and phone services, "and possibly at other times to keep records updated"¹. Its general guidance on joining adds that NS&I checks customers' identity and may require documents proving identity and address⁷.

The same expectations reach well beyond banks. The Information Commissioner's Office, which oversees data protection, says it would expect an organisation to ask for ID if you have asked for sensitive information, "such as health or finance information"⁸. Government services work the same way: the child benefit proof service, the proof of benefits and State Pension service and the Income Tax checking service all tell users they may need to prove identity when signing in, normally with photo ID like a passport or driving licence⁹. Finance is treated as sensitive everywhere, and money transfer is no exception.

There is a second, practical reason for the checks: fraud. MoneyHelper warns that if someone is asking you to pay by bank transfer, "it could be a sign that it's a scam"¹². Identity checks are one of the tools firms use to spot payments that do not add up, including payments made under pressure by a victim. Even government payment services build in notification rules: the Help to Buy equity loan service requires customers to tell its Customer Service team if they pay by bank transfer¹³. Checks and confirmations are the norm, not the exception, whenever money moves.

For a transfer, the practical consequence is that the name on the payment must match the name on your ID. If you have changed your name, or your documents show different versions of your name, expect questions and be ready with evidence linking them.

The documents firms usually accept

There is no single statutory list of acceptable ID, but the documents firms ask for are broadly consistent. MoneyHelper's guidance on opening a bank account says most banks will ask for a driving licence or passport to prove your identity, or a photo if you are applying online, often along with a selfie². Its guidance for people choosing an account for a Universal Credit payment says you will usually need ID such as a driving licence, passport, recent bills or official documents¹⁴.

Credit unions, which many people use for current accounts, typically ask for more: MoneyHelper says you will usually need to provide two recent documents to prove your identity and address, and gives examples including a passport, driving licence, student or work ID card, bus pass, birth certificate, bank statement or energy bill³.

The government services give a sense of how photo ID is used in practice. Each says you will be told when you sign in if you need to prove your identity, that this is to keep your details safe, and that it normally or usually involves photo ID like a passport or driving licence⁹. Transfer firms work on the same pattern: photo ID for identity, a second document for address, and a selfie or video check where the application is online.

A few practical points follow. Documents must be current, or at least recent, because firms are checking that the details are live. If your ID shows a different name from the one you want to send money under, for example after marriage, the firm will need evidence linking the two. And if standard ID cannot be produced, some providers have alternative routes, though what they accept varies by firm.

When a check holds a payment or blocks an account

Checks do not always finish instantly. A payment can be held while a firm completes verification, and an account can be refused or frozen if a check fails or raises suspicion. The rules on refusal are clearest for basic bank accounts, and they illustrate how the wider system behaves. MoneyHelper lists the reasons a bank may refuse to open a basic bank account: not agreeing to a credit check, failing the ID check, suspected unlawful or fraudulent use, or being threatening, abusive or violent towards staff. It adds that the reason must be given unless the bank suspects the customer of fraud or money laundering¹⁵.

That exception matters. Where a firm suspects fraud or money laundering, it may be legally constrained in what it can tell you, which can make a held payment feel like a wall of silence. The firm is not necessarily being obstructive; in some cases it is prohibited from tipping off a person who may be under investigation. For everyone else, the expectation is that a refusal comes with a reason.

For payments, the same logic applies in a milder form. A transfer can be delayed while the firm verifies your identity, the recipient's details or the source of funds, particularly for larger sums. The ombudsman's guidance on sending money abroad shows what evidence firms and the ombudsman work with when a transfer goes wrong, including "any messages used for the international money transfer, such as a Society for Worldwide Interbank Financial Telecommunication (SWIFT) or an MT103"¹⁶. In other words, every stage of a transfer leaves a trail that can be checked, and a hold is often a stage in that checking rather than the end of the payment.

If your payment is held, the practical steps are to respond promptly to any request for documents, to keep copies of everything you send, and to ask the firm for a reference number and a timescale. If the hold turns into a refusal you disagree with, the complaint route later in this page applies.

Who checks you: registered payment firms and their agents

Not every firm that moves money is a bank. Payment services and electronic money are regulated activities, and the rules say something specific about how they can be delivered. Under the Electronic Money Regulations 2011, "an electronic money institution may provide payment services in the United Kingdom through an agent only if the agent is included on the register"¹⁷. The same regulations require the firm to "ensure that an agent acting on its behalf informs payment service users of the agency arrangement"¹⁷. So if you deal with an agent, a shop counter or a website acting for a bigger firm, the agent must tell you that is what is happening.

The Financial Conduct Authority must maintain a register of authorised electronic money institutions, small electronic money institutions, certain other notified persons, registered agents of electronic money institutions, and the National Savings Bank where it issues electronic money¹⁸. That register is the place to check whether the firm you are using is authorised, and whether an agent is properly registered.

In practice, this means two things for a consumer. First, before using a transfer firm, you can look it up on the FCA Register and check its status rather than relying on its website alone. Second, if you are dealing with an agent, for example a local shop taking payments for a transfer service, the agent must tell you it is acting on the firm's behalf, and the agent itself must be on the register¹⁷. A firm's initial disclosure document, the standard information firms must give, also states that if you cannot settle a complaint with the firm, "you may be entitled to refer it to the Financial Ombudsman Service"¹⁹, which tells you the firm expects to be held to the ombudsman's rules.

Electronic money firms and what they can offer

Many of the app-based accounts and transfer services people use are not banks at all but electronic money institutions. They issue electronic money, the balance you hold with them, and provide payment services on the back of it. The regulations set the frame: such firms may operate directly or through registered agents, and the FCA keeps the register of who is authorised¹⁷.

The consumer-facing difference is mostly about protection rather than function. MoneyHelper explains that if an account is not a bank account, "it's likely to be a virtual current account covered by e-money rules. This means your money is kept safe at a different bank, but you'd need to make a claim to the administrator if your provider failed"⁵. An e-money account can look and behave like a current account, with a card, an app and the ability to send money abroad, but the legal position of the money in it is different from money in a bank account.

Some payment services also work through registration rather than authorisation. A news report on first direct's payment feature noted that "both the sender and person receiving the money need to be registered with PayM to conduct the transaction"²⁰, an example of how a payment mechanism can require both sides to be verified before money moves. The pattern is consistent: whoever moves the money wants to know who is on each end.

For choosing between a bank account and an e-money account, MoneyHelper's guidance on choosing the right bank account sets out the questions to ask, including whether the money is protected⁵. The dedicated pages on ways to send abroad and banks versus specialist providers compare the options in more detail.

Safeguarding: how your money is held while it moves

Because e-money and payment firms are not banks, they protect customer money by a different mechanism: safeguarding. The FSCS explains that "e-money and payment services providers are required to safeguard funds they receive from, or on behalf of, customers when providing payment services or issuing e-money"⁴. In plain terms, the firm must keep your money apart from its own money, so that if the firm gets into financial difficulty, customers' funds are not tangled up with its debts.

Safeguarding applies from the moment the firm receives your money until it pays it out. The funds sit with a separate bank or in other approved arrangements, and the firm's own creditors should have no claim on them. That is the theory. In practice, as the next section explains, safeguarding is not the same as the FSCS, and the difference shows up most clearly when a firm fails.

The FSCS adds one nuance: it "may protect safeguarded funds held by e-money providers if the bank holding the safeguarded funds were to fail"⁴. So if the separate bank holding the safeguarded pot collapses, FSCS deposit protection may apply to that bank's failure. But if the payment firm itself fails, safeguarding and the administrator process are what matter, not the FSCS. The full explanation is on the site's page about safeguarding and the FSCS.

Not FSCS protected: what that means for a transfer

The FSCS is blunt about e-money and payment firms: "FSCS can't protect e-money or payment services firms"²¹, and it repeats that "we can't protect you if an e-money firm or payment services firm fails"²². The reason is structural: the FSCS's deposit protection covers banks and building societies, and e-money firms "aren't actual banks"⁴.

This has real consequences for how you think about a transfer. Money held with a transfer firm, or in an app-based e-money account, is not within the FSCS's deposit protection, so the familiar bank protection does not follow the money. The FSCS's own guidance on firms that exist only online makes the distinction clear: safeguarding applies, FSCS protection does not⁴.

The same exclusion applies to other things people sometimes try to move through transfer services. The FSCS states that crypto assets are not FCA regulated and "this means they're not FSCS protected"²³, and its published material explains that "most cryptoassets, for example, aren't FSCS protected because they're not regulated. This includes virtual currencies like Bitcoin and Litecoin"²⁴. A report by the FCA Consumer Panel noted that PayPal has no FSCS protection²⁵. None of this means these services are unsafe to use; it means the safety net underneath them is safeguarding and the administrator process rather than the FSCS.

If a transfer firm fails: claiming from the administrator

When an e-money or payment firm fails, customers claim from the firm's administrator rather than from the FSCS. MoneyHelper describes the position for virtual current accounts: your money is kept safe at a different bank, "but you'd need to make a claim to the administrator if your provider failed"⁵.

The safeguarding rules are what make that claim meaningful. Because the firm had to keep customer funds apart from its own money, the safeguarded pot should still exist and should be distributed to the people it belongs to. The FSCS's published position on one failed firm explains that "FSCS would cover the costs deducted by the JSAs for distributing client money from the client money pool" in most cases²⁶, meaning that while the FSCS does not return your money, it may cover the costs of the distribution process itself, so customers are not paying those costs out of their share.

This is different from the FSCS's normal test for compensation. For a firm the FSCS does cover, the conditions are that "the financial services firm must have failed and be unable to return your money itself, ie be 'in default'", that the FCA or PRA must have authorised the firm when you used it, that you must have actually lost money, and that you must be claiming for personal money lost, though some businesses and charities may claim in some circumstances²⁷. None of that applies to an e-money or payment firm, because the FSCS cannot protect them in the first place²¹.

The practical steps if your transfer firm fails are to watch for the administrator's communications, to make a claim when the process opens, and to keep evidence of your balance and pending transfers. The site's page on when a payment firm fails covers the process in detail.

Complaining about a held or refused payment

If a payment has been held, refused or gone missing, the complaint route is the same as for other banking problems. The Financial Ombudsman Service handles complaints about banking and payments, and lists among the issues it can help with "account closures, disputed transactions, IT failures, and problems with switching services"⁶.

The first step is always the firm itself. The ombudsman's guidance for consumers is plain: "you have to tell the financial business about your complaint first"²⁸, and its guidance on sending money abroad repeats that before bringing a complaint to the ombudsman, the complaint goes to the company involved first¹⁶. The ombudsman then decides what happened using evidence from you, the financial business and any relevant third parties, the relevant law, regulations and industry codes, contracts, why a transaction went wrong, timing against market data, and how clearly things were communicated²⁹.

The rules reinforce the firm's duty to point you to the ombudsman. The official basic bank account conditions state that where an institution refuses an applicant, "the institution must also tell the customer how to complain to the institution and the Financial Ombudsman Service and provide the relevant contact details"³⁰. The payment account switching regulations similarly require providers to give consumers "details of the consumer's right to make a complaint to the Financial Ombudsman Service" about the switching service³¹. And the FCA's rulebook extends ombudsman eligibility to a person who has transferred funds as a result of an alleged authorised push payment fraud, where the respondent was involved in the transfer and the complaint is not a PSD complaint³².

For complaints that involve fraud or identity theft rather than a simple delay, the ombudsman has a dedicated route: it covers "complaints about the way a financial business has dealt with a scam involving unauthorised payments, stolen details or identity theft"³³. So if a held payment turns out to be connected to someone using your details, the same complaint process applies, with the ombudsman looking at how the firm handled it.

ID requests and scams: telling a real check from a fake one

Identity checks are a fact of financial life, but they are also a costume that fraudsters borrow. The ICO's advice on identity theft is to "store documents carrying personal information, such as your driving licence, passport, bank statements, utility bills or credit card transaction receipts, in a safe and secure place"²⁰, precisely because those documents are valuable to a criminal. The same documents a transfer firm legitimately asks for are the documents a scammer wants.

The distinction to hold on to is direction. A firm you have chosen to use will ask for ID through its own official channels: its app, its website, its branch or counter. It will not cold-call you demanding document photos, and it will not ask you to move money to a "safe account" while checks are done. MoneyHelper's warning that a request to pay by bank transfer can be a sign of a scam¹² is the same principle from the other side: unusual payment demands and unusual ID demands deserve the same suspicion.

If you suspect your details have been used without your knowledge, the ombudsman's scam and identity theft route applies to complaints about how the financial business dealt with it³³, and one of its published case studies shows how it examines these disputes: in a case where a loan was taken out in someone's name, the bank's defence included that the applicant had passed a telephone security check, that the funds went to a joint account whose only card was in her name, and that repayments were being made³⁴. The lesson for consumers is that security checks leave records, and those records are what protect you if something goes wrong.

For the wider picture on payment fraud, see the site's guides to scams involving payments abroad and scams and fraud generally, and for the rules that govern transfers, your rights under the Payment Services Regulations.