Banks in Singapore - Do They Reimburse Losses from Scams and Fraud?

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Oct 25, 2024

Banks in Singapore - Do They Reimburse Losses from Scams and Fraud?

The article was published on 19 Sept 2023, and was most recently updated on 25 Oct 2024

2024 Update: Singapore to Introduce Shared Responsibility Framework (SRF) for Scam Losses

A significant development in Singapore's banking sector to enhance customer protection against scams has been introduced. The MAS, in collaboration with IMDB, has started to implement the Shared Responsibility Framework (SRF) for phishing scams, effective December 16, 2024.

This framework establishes a clearer process for determining how losses from phishing scams are shared between banks, telcos (telecommunication companies), and consumers. It aims to strike a balance between encouraging responsible consumer behavior and incentivizing financial institutions and telcos to invest in robust anti-scam measures.

Key Points of the Shared Responsibility Framework

Financial institutions (banks and payment service providers) are the first line of defense. They are required to implement measures such as:
- Real-time fraud detection to identify and potentially block suspicious transactions exceeding $25,000.
- A 12-hour cooling-off period for high-risk activities like large fund transfers or adding new payees.
- Sending real-time alerts to consumers for suspicious activities.

Telcos are responsible for securing their SMS channels. This involves filtering out scam messages and blocking those containing known phishing links.

Consumers remain responsible for safeguarding their accounts. This includes practicing good online security habits, being vigilant against phishing attempts, and promptly reporting suspicious activity.

What This Means for You

The SRF represents a significant step forward in protecting Singaporean consumers from scams. Here's what you can expect:

Stronger safeguards from banks and telcos: Financial institutions and telcos are now obligated to implement stricter security measures, minimizing the risk of scams infiltrating their systems.

Clearer guidelines for reimbursement: The SRF establishes a process for determining who bears the responsibility for losses in case of a scam. This can provide greater clarity and potentially increase your chances of receiving reimbursement if you become a victim.

Continued vigilance is crucial: While the SRF strengthens safeguards, you remain the first line of defense against scams. Stay informed about common scams, practice good online security habits, and never share personal or financial information with unverified sources.

We encourage you to visit here for a comprehensive overview of the SRF.

In recent years, Singapore has experienced an increase in the number of scams, with vulnerable populations such as the elderly being particularly targeted. Over $470 million was lost to fraudsters in 2022 alone, a 65% increase over 2021 (Today Online, 2023). This growing scam problem has increased public scrutiny of banks and their liability policies when clients fall victim to frauds and scams.

This growing scam problem has increased public scrutiny of banks and their liability policies when clients fall victim to frauds and scams. Banks have been pressed to do more to protect customers, with MP Sylvia Lim stating, "While banks are not legally obliged to make good the losses of scam victims, there is a legitimate expectation for banks to adopt a caring attitude, and to reimburse their vulnerable customers who lose substantially because of their scams" (Today Online, 2023). However, for many consumers who have fallen victim to more sophisticated fraudulent activities, bank compensation rules remain ambiguous.

This article will examine Singapore's major banks' stance on reimbursement rights for scam and fraud victims, as well as where other nations stand on compensation for scam and fraud victims.

What Is MAS Guidelines Regarding Bank Liability For Scams And Fraud?

Although the MAS has provided principles-based recommendations for dealing with scam losses, banks are not required by law to repay clients.

According to the MAS rules, banks are supposed to serve consumers fairly and to have effective mechanisms in place for fraud identification and prevention. However, final accountability is determined by whether the consumer has fulfilled their own duties.

Customers must also secure their accounts, prevent revealing important information, report suspicious transactions immediately, and file police complaints in fraud instances on time.

If a consumer has satisfied these duties but is still a victim of an unpreventable scam, MAS rules state that banks should evaluate repayment on a case-by-case basis rather than dismissing claims outright.

The customer's profile, behaviour, any weaknesses that rendered them vulnerable to the scam, and the bank's own scam detection efforts should all be considered in the reimbursement evaluation.

The MAS has advised banks to be more empathetic and open with refunds for disadvantaged consumers who have been duped in situations when they have essentially satisfied their own commitments.

However, the rules fall short of requiring banks to pay victims of scams.

Sourced From:

Monetary Authority of Singapore. (2021). Principles to Promote Fairness of Outcomes for Bank Customers. https://www.mas.gov.sg/regulation/guidelines/principles-to-promote-fairness-of-outcomes-for-bank-customers

Monetary Authority of Singapore. (2022). Consumer Advisory on Prevention of Scams and Conducting Proper Due Diligence. https://www.mas.gov.sg/news/media-releases/2022/consumer-advisory-on-prevention-of-scams-and-conducting-proper-due-diligence

Case Studies: OCBC Reimbursement Of Scam Victims

At least 469 OCBC customers were victims of SMS phishing schemes in December 2021, with total losses believed to be over $8.5 million. All fraud victims' customers were refunded by OCBC.

While OCBC's reimbursements to hundreds of SMS phishing scam victims, particularly vulnerable seniors, have raised public expectations that banks will compensate customers during major scams, OCBC has maintained that responsibility is shared and that payouts will continue to be decided on a case-by-case basis, and legal experts say it is unclear whether OCBC's actions have definitively set a binding precedent or changed liability principles.

What Are Being Done By The Banks And MAS To Protect Consumers?

After nearly 800 OCBC customers lost around $13.7 million in total to SMS phishing scams in late 2021, the Monetary Authority of Singapore announced plans in February 2022 to develop a framework that would outline how responsibility for scam losses should be shared equitably between banks and consumers.

MAS initially stated they aimed to publish a draft of this loss-sharing framework within 3 months for public consultation. However, developing the framework has proven more complex than expected.

In parliamentary responses, MAS explained that finalizing the details has taken longer due to the intricacy of the issues involved in balancing accountability with empathy when apportioning liability for scams.

As a result, MAS now plans to release a consultation paper to seek public feedback on the proposed scam loss responsibility framework in October 2023 rather than earlier in 2022 as originally targeted. The consultation aims to involve various stakeholders in shaping how banks, consumers, and others involved can share the burden of scam losses more fairly going forward.

How Does Singapore Banks Compare With Other Countries Regarding Scam Reimbursement?

The EU has established stronger protections for consumers against bank transfer scams through regulations like PSD2 (Payment Services Directive 2) which set clear requirements for banks to detect and prevent fraud while also defining consumer reimbursement rights. Under PSD2, banks operating in the EU must have robust security systems and authentication processes to identify suspicious transactions and block potential scams.

If fraudulent transactions still occur, banks are obligated to reimburse customers the lost funds in most cases, unless the bank can prove gross negligence by the customer. For remote transactions, PSD2 caps consumer liability at €50 if they failed to properly secure account access credentials.

UK: Under a world-first system that begins next year, the United Kingdom will require banks to reimburse fraud victims. New legislation in the United Kingdom offer a risky experiment to explore if holding the banking industry accountable can reduce massive losses by incentivizing banks to engage in detection and prevention. The new rules from the UK’s Payment Systems Regulator are intended to incentivise all businesses involved in payments to take more action against scam activity, with reimbursement costs split 50:50 between the bank that sends and the bank that receives the payment.

Australia: No regulations oblige Australian banks to reimburse scam victims, though some banks have self-governed reimbursement policies.

Hong Kong: No mandatory requirements but HKMA has outlined compensation expectation principles. Major banks have announced reimbursement policies.

Singapore: MAS guidelines encourage reimbursement but no legal mandate. Banks have discretion and assess case-by-case based on circumstances. Less certainty for victims.

Malaysia: No legal mandate for banks to reimbursement and is on good-will basis.

US: Generally no duty for banks to reimburse. Some may do so voluntarily but policies vary. Highly bank-dependent.

Canada: No mandatory compensation but some banks may reimburse voluntarily on a discretionary basis.

In general, except for UK which made it mandatory for the banks to reimburse bank's scam victim most of the countries work on a case by case basis.

There are two schools of thinking here. Making it necessary for banks to pay scam victims may encourage consumers to be lazy and careless in terms of their own responsibility to avoid scams.

While this would also push banks to spend in improving the security of e-banking systems and implementing stricter SOPs and protocols for online cash transfers.

Non or Case By Case Reimbursement Basis Approach:

Consumer Responsibility: Advocates of this approach argue that consumers have a responsibility to take precautions when conducting online transactions. They believe that individuals should be aware of common scams and practice good online security habits.

Incentive for Vigilance: When banks do not automatically reimburse victims, it incentivizes consumers to be more cautious and vigilant in their online activities. This can lead to a more informed and security-conscious user base.

Resource Allocation: Banks can use their resources more efficiently by assessing each case individually. They can focus their efforts on investigating legitimate claims and reducing fraud.

Mandatory Reimbursement:

Consumer Protection: Supporters of mandatory reimbursement argue that it provides a safety net for consumers who may fall victim to increasingly sophisticated scams. It ensures that innocent victims are not left financially devastated.

Investment in Security: Knowing that they will be responsible for reimbursing victims, banks may have a stronger incentive to invest in robust cybersecurity measures and enforce stricter standard operating procedures (SOPs). This can lead to an overall improvement in online security.

Customer Trust: Mandatory reimbursement can enhance customer trust in the banking system, as individuals feel more protected and are more likely to engage in online transactions.

What Can You Do When You Are A Victim Of A Scam?

Contact your bank immediately to report unauthorized or fraudulent transactions. Provide information like account details, transaction records, and scam specifics. Timeliness is key, as some banks may deny claims reported too late.

File a police report within 24 hours to officially document the scam. This is required by many banks for reimbursement claims. Provide details like scam amount, dates, and scammer communications.

Submit the scam reimbursement claim to your bank with supporting documents like your police report. Follow up persistently if needed.

If the bank denies your claim, consider going to mediation. The Financial Industry conflicts Resolution Centre (FIDReC) provides low-cost mediation services to help financial businesses and customers resolve conflicts. While others may claim that Fidrec's limit is merely S$100,000, which is half the daily PayNow maximum of most banks.

For large scam losses, consult a lawyer about legal options to recover funds. Lawsuits have compelled some banks to reimburse victims in certain cases.

Check if the scam transactions were covered by your insurance policies. Some insurers provide scam or fraud loss coverage such as Cyber Insurance Coverage.

Strengthen your account security going forward by enabling two-factor authentication, monitoring closely for suspicious transactions, and not oversharing account info.

Provide info to authorities/banks on the scam tactics to help investigations and protect others. Share only with reputable channels versus random people soliciting information online.