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Currently, transfers must be processed or declined by the end of the next business day.
Under the new law, they will allow an extension of three more days.
For years, banks have needed to have reasonable grounds to suspect fraud before being able to investigate but have also faced pressure from customers who want payments to be made instantly.
Bank payments could be delayed by up to three days under new rules that would give banks more time to investigate potential fraud
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According to the BBC, long-proposed new regulations will come into force at the end of October – later than originally planned.
The previous government’s draft legislation had proposed giving banks the new powers by October 7, but now they will take effect from the end of the month.
Fraud is the most common offence in the country.
Ben Donaldson, managing director of economic crime at UK Finance, which represents the banking industry, thinks the new law will be used “fairly sparingly”.
“This is really relevant to cases of investment fraud and romance fraud where there is psychological manipulation of the victim,” he told the BBC’s Today programme.
Some, however, have resisted the change.
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The Society of Licensed Conveyancers said it was “deeply concerned” that a four-day freeze could be catastrophic for people who are buying a home and have to transfer large amounts of money quickly.
But Mr Donaldson said: “We will only use this power where we’ve got reasonable grounds to suspect it is a fraud.”
Banks will need to inform customers when a payment is being delayed, explain what the customer needs to do to unblock the payment and pay compensation if the delay lands the customer with extra charges.
