SINGAPORE — Workers’ Party (WP) chairman Sylvia Lim urged the Government to mandate banks to bear full responsibility in reimbursing scam victim’s losses, but her proposal in Parliament was shot down by Mr Alvin Tan, Minister of State for Trade and Industry, who said that it would not be fair or “desirable”.

Ms Lim, who is a Member of Parliament (MP) for Aljunied Group Representative Constituency, was speaking on Monday (Sept 18) during an adjournment motion about losses from scams and malware fraud.

Saying that banks should take the lead in tackling scams, she called on the Government to take a page from other jurisdictions such as the United Kingdom in protecting consumers from scam losses and introducing more safeguards for bank accounts.

She also urged the Monetary Authority of Singapore (MAS) to adopt regulatory guidelines to prevent banks from making settlements that are “onerous and one-sided”.

In response, Mr Tan spelt out what the Government is doing to combat scams such as educating the public, as well as the various mediation options for scam victims.

Mr Tan, who is also Minister of State for Culture, Community and Youth, said that there will be a public consultation paper to be released next month on the sharing of losses in scam cases. It will be focused on phishing scams for a start.

The Government has been working to develop a framework to mitigate losses by victims of phishing scams.

It builds on the work done last year by the Payments Council chaired by MAS to develop a framework for the equitable sharing of losses due to phishing scams that involve financial institutions.

WHY BANKS SHOULD TAKE THE LEAD

Ms Lim said that scams have become increasingly difficult for people to detect, and more young people who are technologically savvy are falling prey as well. As scammers wipe clean the life savings of people, the impact can be “devastating”.

In her call for banks to bear full responsibility for scam losses, she pointed out that public education may help mitigate the number of scam victims, but it “will always be playing ‘catch-up’ with these organised criminals”.

She also said that the Financial Industry Disputes Resolution Centre (Fidrec), which oversees disputes on who is responsible for a scam, typically resolves a case within six months.

“For a family whose life savings have been wiped out, this would be an inordinate and stressful delay. Further, forcing certain vulnerable groups such as the elderly to confront a big bank would be far from ideal.”

She added that banks are “best-positioned and the best-resourced” to combat scams by monitoring transactions, blocking suspicious payment flows and keeping up-to-date with technological developments.

On how to do this, Ms Lim suggested that the Government could look at the UK’s requirement from next year for banks to fully reimburse scam victims.

This excludes cases where customers were fraudulent or grossly negligent, or the transaction involved cryptocurrency or international payments.

“The solution for such mandatory reimbursement is simpler and quicker. It will generally not require a time-consuming and resource-intensive adjudication process for each case,” Ms Lim said.

Such a solution would give consumers peace of mind when making transactions, and ensure that scam victims would not need to undergo a complex process to regain their losses.

This would also incentivise payment service providers to improve their detection and prevention of fraud, and similar measures are being considered in other countries such as Australia, Ms Lim said.

WHAT THE CENTRAL BANK CAN DO

Besides this, Ms Lim also suggested that MAS should advise banks to promote the use of physical tokens for two-factor authentication and to regulate transfers to bank accounts associated with cryptocurrencies or digital payment tokens. 

To better protect vulnerable people such as seniors or someone who is “mentally impaired”, she suggested that banks scrutinise closer the transactions from accounts held by this group of customers.

Some ways that banks could do this may be to mandate lower transfer limits and longer waiting periods for transactions to be processed.

Ms Lim said that victims have faced “unfair settlements” when they approach their banks for help with losses from scams.

This includes being offered goodwill payments that are “paltry” to the loss, and being tied to non-disclosure agreements, which are one-sided and require customers to forgo all rights to recover further sums.

To better protect victims, she called on MAS to adopt regulatory guidelines when it comes to settling consumer disputes.

“Some possible guidelines include banning the use of onerous practices such as blanket non-disclosure agreements, which require customers to give up legitimate claims to recover monies.

Customers should also be given full disclosure about their rights and forms of recourse against the bank.”

Although MAS has informed scam victims to approach Fidrec for assistance, Ms Lim said that the monetary limit of S$100,000 for each claim should be raised. 

She pointed out that the daily transfer limit for electronic payment service PayNow is twice that of Fidrec’s limit. For people who have lost more, Fidrec’s limit might discourage them from seeking help.

WHY BANKS SHOULD NOT TAKE FULL RESPONSIBILITY

In his response to Ms Lim, Mr Tan said that the Government must strike a balance between fairness and accountability.

“Full restitution without due consideration of culpability is neither fair nor desirable,” he said.

“Doing so can erode vigilance and personal responsibility, and lull users into complacency.”

MAS now requires banks to secure their digital systems, such as by implementing multi-factor authentication, to verify a customer’s identity and to authorise online transactions, Mr Tan said. 

The Government also has other initiatives to combat scams. This includes public education and creating the Scamshield mobile application to block scam messages and calls.

Even with enhanced security, scammers can still bypass the digital security measures. This is why every consumer has to play an important role by practising good cyber hygiene and being digitally diligent, he added.

When it comes to handling and investigating customer disputes, MAS already has guidelines in place, he said.

“In scam cases, banks must consider if they had fulfilled their obligations and whether the victim had acted responsibly.

“Customers who practised good cyber hygiene and were diligent in preventing their log-in information and one-time passwords from being divulged to third parties should not have to bear losses.”

He added that customers unhappy with a bank’s goodwill payment may seek mediation and adjudication with Fidrec or pursue the case in court.

As for Ms Lim’s suggestions on physical tokens, Mr Tan said that MAS is looking into it and that bank customers may ask for these tokens from their banks.

“MAS also continues to watch for developments in the digital payment tokens or cryptocurrency space, and we regularly review the adequacy and appropriateness of these regulations,” he said.