Reimbursement of Innocent Bank Scam Victims Must Be Made Mandatory
The recent massive phishing scam at OCBC has highlighted Singaporeans’ inadequate protection against banking fraud. After pressure from MAS, OCBC has stated that all scam victims will get “full goodwill payouts” but has not publicly provided any details about what criteria it will use to determine who are genuine victims and whether they will all receive 100% of their money back. State media reported that MAS has staid it “takes a serious view” and that “OCBC will conduct a thorough probe to identify the deficiencies in their processes and implement the necessary remedial measures. MAS will consider appropriate supervisory actions following this review.”
However MAS’s blustering and attempt to portray itself as on top of the situation just highlights the fact that it is behind the curve and the Government’s failure to do enough to protect Singaporeans from phishing scams. Singapore as usual lags behind other countries in protecting consumers probably because of the Government’s conflict of interest as both the ultimate regulator and the owner or major shareholder in most of the major Singaporean companies. Over many years I have written about the numerous monopolies and oligopolies, usually involving a Government-Linked Company as the price setter and a few private sector but heavily Government-influenced companies that collude in keeping prices high. The Government’s conflict of interest means that the Competition and Consumer Commission of Singapore is pretty much toothless and in fact was even headed for a time by a Minister’s spouse, Josephine Teo’s husband (not that anyone in Singapore would dare to stand in the way of LHL’s and the PAP’s wishes. The Government owns 29% of DBS which is by far and away the dominant player in Singapore’s banking sector, having a 60% share of deposits and over 90% of the population as customers.
In the UK there is already a voluntary scheme (the Contingent Reimbursement Model) in place to compensate victims of what, to use the correct terminology, are designated Authorized Push Payment (APP) scams. This is because the UK has a Payments Systems Regulator (PSR) which is independent and whose statutory objectives include the promotion of competition and ensuring that payments systems are operated in a way that considers and promotes the interests of all those who use them. In Singapore that duty falls to MAS which is not independent of the Government and thus suffers from its conflict of interest between being the regulator and having significant control over the largest player and biggest Payment Systems Provider (PSP), DBS.
The UK PSR recently conducted a consultation on ways of dealing more effectively with APP scams. This resulted in the following proposals:
- Publication of fraud data by banks: require the major PSPs in the 12 largest banking groups in Great Britain and 2 largest banks in Northern Ireland outside those banking groups to publish data on their performance in relation to APP scams, and reimbursement levels for victims
- Improve scam prevention: task industry to improve intelligence sharing, to improve detection and prevention of APP scams
- Reimbursing victims: there should be mandatory reimbursement for victims of scams who have done nothing wrong. While there could currently be challenges with making reimbursement mandatory, we set out two ways of achieving this so that, when the laws are changed, we can act quickly as necessary to bring about the right outcomes.
The UK Government has said it will legislate to ensure any barriers in the way of the PSR implementing these proposals will be removed and in particular that blameless victims of scams are fully reimbursed.
We need the Government to take a similar line and make it mandatory for PSPs in Singapore to fully reimburse blameless victims so that they do not have to rely on “goodwill” as in the recent OCBC case. Publishing statistics on which banks are most vulnerable to APP scams and their record on reimbursing victims will also put pressure on the banks to put better security in place and to go after the receiving PSPs which enable the scammers by allowing them to transfer the money they have stolen.
Whether the Government will do so is another matter. For too long Singaporeans have put up with a lack of regulation and consumer protection either because they have been deceived and told that this will create more economic growth, higher incomes and greater employment and that Singapore must not emulate the welfare states of the West and pander to consumers or they are simply ignorant and mistakenly believe that the PAP Government has their best interests at heart. We need not only an independent PSR and mandatory reimbursement but we also need a Financial Ombudsman. At the moment none of these things seem likely to happen and the Government will no doubt hope that by keeping quiet or by having MAS make the appropriate fierce noises without doing anything that Singaporeans will forget till the next and even more sophisticated scam.