In a significant statement, Deputy Finance Minister Lim Hui Ying emphasized that banks cannot entirely shift the blame onto their customers for losses resulting from financial scams. Speaking to the Dewan Rakyat, Lim outlined the responsibilities of banks and the avenues available for victims of such scams.
Lim stated that while banks should bear the responsibility for losses arising from their own system weaknesses or inadequate risk management practices, they can rightfully deny liability if it is proven that the customer’s negligence led to the compromise of security details. Each case of financial fraud is to be meticulously investigated, ensuring fair assessment and accountability.
Victims of financial scams have the right to accept or reject compensation offers from banks. If disputes arise regarding the compensation amount, victims can escalate their complaints to the Ombudsman for Financial Services (OFS), an independent entity established under Bank Negara Malaysia (BNM) in 2013. The OFS provides free services to clients involved in disputes with financial service providers, ensuring a fair resolution process.
From 2020 to mid-2023, the banking sector saw 18,238 scam cases, with approximately 2,000 cases brought before the OFS. Of these, a commendable 75% have been resolved.
To bolster client protection, BNM updated its policy on unauthorized online banking transactions. This policy mandates that financial institutions conduct swift and transparent investigations while also strengthening preventive measures. Compensation under this policy will consider the effectiveness of the bank's security controls against financial scams and delineate the roles of both consumers and banks in addressing such issues.
In response to the rising incidents of scams, major banks have adopted several security measures since June 2023. These measures include ensuring transaction compliance with security features, implementing stronger scam detection rules, and limiting customers to one device for online banking authentication to prevent misuse. Additionally, banks are transitioning from SMS-based one-time passwords to more robust authentication methods for online transactions involving account openings, fund transfers, and personal information exchanges.
BNM has also introduced a ‘kill switch’ mechanism, allowing users to freeze their accounts upon detecting suspicious activities. This proactive measure is intended to curb unauthorized access and usage.
The issue of financial scams and the banks' responsibility was further highlighted by Sarawak Democratic Action Party (DAP) chairman Chong Chieng Jen. Chong called on the Ministry of Finance (MoF) to address ten specific cases of financial scams where victims suffered substantial losses due to unauthorized transfers or credit card transactions. He urged the victims’ losses to be refunded, stressing that these cases involved significant failures in the banks' systems.
Chong detailed instances where victims did not engage in any activity that would typically lead to a security breach, such as downloading dubious mobile apps or receiving unauthorized transaction notifications. Despite promptly notifying the banks of the unauthorized activities, the victims received no assistance or compensation. Chong argued that if these scams resulted from system weaknesses, banks should compensate the victims.
Chong's appeal underscores a broader issue within the financial sector: the need for banks to prove that their systems are secure and that no systemic weaknesses exist. He highlighted that in many cases, the one-time passwords or personal access codes sent by the bank's systems were intercepted by scammers, enabling unauthorized transactions. This points to a significant flaw in the banks' security measures.
The call for banks to compensate victims even in cases where customer negligence is proven emphasizes a need for greater empathy and support for victims. Chong's plea for proactive intervention by the MoF aims to ensure that victims of financial scams receive justice and that their financial losses are mitigated.
The statements from Deputy Finance Minister Lim Hui Ying and DAP Chairman Chong Chieng Jen highlight the urgent need for robust security measures and accountability within the banking sector. Banks must not only strengthen their defenses against scams but also provide fair compensation and support to victims, ensuring a safer financial environment for all.
By: Kpost
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