Banks should fully reimburse scam victims, argues WP Chairman Sylvia Lim

SINGAPORE: In a compelling adjournment motion presented in Parliament on Monday, 18 September, Workers’ Party (WP) chairman, Sylvia Lim, emphasized that banks should bear full responsibility for reimbursing victims of scams and malware fraud.

Ms Lim’s motion comes amid growing concerns over the surge in scam victims across the nation. Malware scams targeting Android users have surged, causing unauthorized transactions from victims’ bank accounts. Various media sources have documented these incidents, affecting users across different banks.

Law enforcement has observed an increase in reports from Android users falling victim to these scams, leading to significant financial losses despite victims not disclosing their banking details.

Ms Lim’s argument was rooted in her belief that the onus should be on banks to restore the financial stability of the victims, rather than burdening individuals to navigate the intricacies of the financial system to reclaim their lost assets.

In her poignant speech, Ms Lim stated, “Given the delay in the publication of this framework, many scam victims have been left without recourse under the Loss Sharing Framework by no fault of their own.”

This comment referred to the MAS’s earlier intentions of implementing a loss-sharing framework, highlighting the urgency of the situation.

She further said, “Today, most banks only offer these on request and have a digital token or SMS verification as the default option for two-factor authentication (“2FA”). This means that the mobile phone becomes a single source of vulnerability; should the phone be infected with malware, 2FA does not, in effect, act as a second degree of authentication.”

Ms Lim argued that the reintroduction of physical tokens for 2FA would fortify the layers of security and safeguard users more effectively.

Drawing attention to the plight of vulnerable customers, Ms Lim remarked, “Vulnerable customers are another category to watch out for.

Added verification steps and longer mandatory waiting periods should also be implemented where the transaction involves a vulnerable client, such as an elderly or mentally impaired person.”

The WP chairman argued that with current bank practices, such individuals are at heightened risk, and hence, banks should mandate lower transfer limits and longer waiting periods by default for such accounts.

Ms Lim also pointed towards international benchmarks, particularly the forthcoming UK legislation.

She expressed, “The Government should consider developments in other jurisdictions such as the UK to ensure that the banks bear the cost of reimbursing victims, as they are best placed to identify and prevent such scams.”

These insights underline the global precedence that banks should play a more proactive role in protecting their customers from the evolving threats of scams and cyberattacks.

Ms Lim noted that the UK Payment Systems Regulator’s cost-benefit analysis supports the Reimbursement Model, suggesting it motivates payment service providers to bolster fraud detection and prevention.

This approach has been echoed by banks such as the UK’s TSB. A senior TSB official stated that being liable for online fraud reimbursements has spurred the bank to actively deter scams from the beginning, leading to decreased fraud incidents.

However, it wasn’t just the banks’ preventive measures that came under Ms. Lim’s scrutiny. She had concerns about the post-scam procedures and the way banks handle settlements with victims.

“Mr Speaker, some of us have received feedback from scam victims about how their banks try to settle their complaints. First, the sums offered as goodwill payments may be paltry in relation to the loss,” she argued.

She also raised concerns about the non-disclosure agreements victims were being made to sign, asserting, “Moreover, such offers are usually tied to non-disclosure agreements (NDAs) which are onerous and one-sided, requiring absolute secrecy from the customer and requiring the customer to forego all rights to recover further sums.”

The WP chairman believes the current situation exposes the significant power imbalance between individual victims and banking institutions. As a result, she called on the Monetary Authority of Singapore (MAS) to take on a more active role.

“While I agree that the MAS cannot micromanage the banks, can it do more than issue a motherhood statement that MAS expects the banks to treat their customers fairly?” she questioned, pressing for regulatory guidelines that ensure fairness as a principal guideline in settling consumer disputes.

While MAS advises scam victims to seek assistance from Fidrec, Ms Lim has voiced concerns regarding its monetary cap.

She noted that the current S$100,000 limit per claim at Fidrec (Financial Industry Disputes Resolution Centre) falls short, especially when juxtaposed with the daily transfer limit of electronic payment service PayNow, which stands at double that amount.

This disparity, she emphasized, could deter individuals who have endured more significant losses from approaching Fidrec for aid.

In her concluding remarks, Ms Lim made a heartfelt plea, “Mr Speaker, it is time for the Government to act swiftly and decisively on scam losses. Of paramount importance is ensuring that Singaporeans have confidence in their banking system and ensuring that those who have suffered a loss are fairly compensated.”

However, Ms Lim’s proposal was shot down by Mr Alvin Tan, Minister of State for Trade and Industry, who argued against the mandate for banks to shoulder full reimbursement responsibilities for victims of scams and malware fraud.

Mr Tan, emphasizing the need for a delicate equilibrium, stated, “The Government must strike a balance between fairness and accountability.”

Taking a stand against complete restitution, he remarked, “Full restitution without due consideration of culpability is neither fair nor desirable. Doing so can erode vigilance and personal responsibility, and lull users into complacency.”

Highlighting the efforts of MAS, Mr Tan mentioned the requirements placed on banks to fortify their digital systems. He cited the introduction of multi-factor authentication measures aimed at both verifying a customer’s identity and authorizing online transactions.

On the broader spectrum of governmental strategies to combat scams, Mr Tan elaborated on several initiatives, including public education drives and the inception of the Scamshield mobile application, specifically designed to block scam messages and calls.

In light of digital security challenges, Mr. Tan emphasized the paramount role consumers play in safeguarding themselves. “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 explained.

Regarding the handling and investigation of customer disputes, Mr Tan confirmed MAS’s proactive approach.

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.”

For aggrieved customers dissatisfied with a bank’s goodwill gesture, he recommended exploring mediation and adjudication avenues with Fidrec or considering legal routes.

Addressing Ms. Lim’s proposal on the reintroduction of physical tokens, Mr. Tan conveyed that MAS is currently assessing the potential implications.

He assured, “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.”