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Singapore to publish framework on liability for scam losses

The Monetary Authority of Singapore (MAS) will launch a framework which could provide clarity on how losses from scams are to be shared between consumers and financial institutions.

Mark Tan of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, said: “The occurrence of common scams and frauds associated with banks and its customers’ accounts are becoming increasingly more and more frequent as fraudsters become more sophisticated. Given this, the recent development whereby the regulatory authorities in Singapore are stepping in to commence a review of the practices which the financial industry can put in place to better protect consumers. Although it remains to be seen how the apportion of liability between a financial institution and a consumer would be determined if similar situations were to occur again.”

“It is important in the interim to note that banks are not required to make goodwill payouts where such frauds have occurred, and customers accordingly should take the appropriate precautions on their part to not become a victim to such fraudulent outreaches, as they may potentially have to personally bear part or all of the costs of such frauds where they did not do so,” he said.

According to a statement made by MAS, consumers and financial institutions both have responsibilities to be vigilant and to “take precautions against scams”. For instance, financial institutions must put measures in place to safeguard their customers’ accounts and to detect and respond to suspicious transactions.

Separately, precautions which consumers are advised to take include ensuring that they do not reveal their personal and banking details to anyone and that they should not click on any links in text messages or emails which appear to be sent by banks. Instead, consumers should always ensure that all transactions are done only on the bank’s official website or via the bank’s official mobile application.

MAS’ announcement followed a recent incident involving goodwill payouts being made by OCBC bank to its customers who collectively lost approximately US$14 million to fraudsters that had spoofed its customers by disguising themselves as the bank and sending them fake SMSes with phishing links.

MAS has highlighted that the proportion of losses which each party bears "will depend on whether and how the party has fallen short of its responsibilities".

MAS will also be leading the Payments Council, which will be reviewing practices that the financial industry can put in place in order to better protect consumers. This will also include a review of how to apportion the liability in the event of a fraudulent online transaction.

In the coming months, MAS will be seeking public feedback on this framework, including responsibilities of other key parties involved.

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