Banks could be on the hook for phishing flim flams

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Banks could be on the hook for phishing flim flams

The head of the Financial Supervisory Commission Eun Sung-soo, The Minister of Science and ICT Choi Ki-young attends an event on voice phishing crime prevention held at the Shinhan Bank headquarters in Jung-district, central Seoul, Wednesday. [YONHAP]

The head of the Financial Supervisory Commission Eun Sung-soo, The Minister of Science and ICT Choi Ki-young attends an event on voice phishing crime prevention held at the Shinhan Bank headquarters in Jung-district, central Seoul, Wednesday. [YONHAP]

 
Financial institutions will be held more responsible for voice phishing scams if a new government plan is implemented.  

 
From January to April, a total of 122 billion won ($101.5 million) of voice phishing scam damages were reported, according to the Financial Services Commission (FSC) and the Ministry of Science and ICT. They said they will take stronger measures to eradicate such fraudulent activities for good.  
 
The recent announcement focuses on making financial institutions to be fully liable for compensation. The plan states that these companies are responsible for voice phishing damages if no action is taken ahead of time. This means that if a bank previously warned the customer of the danger and requested them not to send the money, damages will not be the responsibility of the institutions.  
 
Until now, financial companies were responsible for compensation only if the victim failed to verify recipient identifications for money transactions or if a financial institution failed to halt money transfers for legitimate claims. Many claim it was hard to hold financial institutions liable for compensation for such crimes.  
 
Kwon Dae-young, an official in the FSC said the new measures will help “level the playing field,” saying that it is wrong to put the blame on the individual for such crimes, since “anybody can fall victim” to voice phishing schemes.
 
Kwon said the measure is similar to credit card companies compensating customers for illegal payments made on credit cards. As credit card companies invest in fraud detection systems, the government hopes the new measure will encourage financial institutions will develop more preventive measures for fraudulent activities.  
 
“The goal is to have financial institutions take the same responsibility as infrastructure operators,” said Kwon.  
 
The actual amount of compensation is yet to be decided. The government only stated it would listen to both the finance industry and customers to come up with a reasonable middle ground that’s acceptable.  
 
Some criticized that if financial institutions have to pay back the entire amount of damages, customers may abuse the system for their personal benefit.  A revision to the law is inevitable to have financial institutions liable for such fraudulent activities, which the FSC plans to submit by the end of this year to the National Assembly.  
 
The ICT ministry will focus on preventing cloned phones and phone number manipulation. It said it will thoroughly verify the identity of those who open pre-paid phones through online channels, to prevent them from being used as cloned phones of flim flam artists.
 
It will oversee not only the three telecommunication operators but also mobile virtual network operators (MVNO) to prevent the same phone number from being used simultaneously by two parties.  
 
It also announced to compile a so-called “white list” of phone numbers so that receivers can immediately notice when a perpetrator is impersonating government institutions like the FSC, or other government institutions.  
 
Voice phishing frauds will face heavier penalties than those guilty of normal fraud. For those who sell or lend a fake bank account, charges will be raised from three years in prison or 20 million won in fines to five years in prison and 30 million won in fines. The government will also set up new regulations for accomplices, such as those withdrawing money.  
 
“It’s also important for individuals to protect themselves from voice phishing crimes. We advise the public always keep in mind the 10 examples of voice phishing crimes, and go to your local bank to sign up to delay all money transfers,” added Kwon.  
 
BY HAN AE-RAN  [kang,jaeeun@joongang.co.kr]

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