Singapore Introduces Shared Liability Between Consumers and Banks to Share Financial Losses

Singapore – In response to the growing concern over rampant payment and transfer scams, Singaporean officials have announced plans to introduce a split liability scheme that will hold both consumers and banks accountable for financial losses resulting from scams. This move aims to address a pressing question in the digital age: who bears responsibility when scams occur?

Countries like Australia have explored shared loss schemes, while the European Commission has proposed refunding victims of specific fraud types, including authorized push payment scams. In the United Kingdom, starting next year, banks will be mandated to reimburse scam victims up to one million pounds, with the burden shared between the sending and receiving banks.

Singapore’s Minister of State, Alvin Tan, has taken a different stance on this issue. “There are some views that banks can easily absorb losses arising from individual scam cases. However, full restitution without due consideration of culpability is neither fair nor desirable,” he stated during a parliamentary session on Monday.

The concept of a shared responsibility framework in Singapore was initially proposed in February 2022 when threat actors stole approximately SG$13.7 million ($10.2 million) from nearly 800 customers of a single bank through SMS spoofing.

At first, the Oversea-Chinese Banking Corporation (OCBC) offered “goodwill” payments to only a small percentage of victims. However, after the Monetary Authority of Singapore (MAS) threatened regulatory action, OCBC changed its stance and pledged “full goodwill payouts” to all victims.

The significant financial impact of these payouts prompted Singaporean authorities to reevaluate their approach to combating scams. Then-Finance Minister, now Deputy Prime Minister Lawrence Wong, emphasized the need for shared responsibility between customers and banks to prevent customers from becoming complacent.

The MAS already mandates that banks enhance their digital security measures, including implementing multi-factor authentication for online purchases and sending alerts for specific transactions. Banks have also received guidance on handling and investigating disputes, with MAS overseeing these efforts. However, these measures have proven insufficient against determined social engineers.

“In scam cases, banks must evaluate if they have fulfilled their obligations and whether the victim acted responsibly. Customers who practice good cyber hygiene and take precautions to prevent the disclosure of their login information and one-time passwords to third parties should not bear losses,” emphasized Minister Tan.

Under the current process, dissatisfied customers can pursue legal action, while others may accept the terms and conditions associated with any compensation offer. These agreements often result in financial disappointment and non-disclosure agreements, a point raised by Parliament member Sylvia Lim.

Lim advocated for a system akin to the one in the United Kingdom, which would instill greater consumer confidence in their transactions. As Singapore prepares to unveil its consultation paper next month, the nation is taking steps to address the complex issue of liability in the face of evolving digital threats.

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