Banks and tech companies clash over responsibility for online fraud in the UK
Meta is facing calls from UK banks and payments firms such as Revolut to financially compensate those defrauded on its service.
Jaap Arriens | Nurphoto via Getty Images
Tensions are escalating between banking, payments and social media companies in the UK over who will be responsible for compensating people if they fall victim to online scams. .
Starting October 7, banks will be required to start compensating victims of so-called authorized push payments (APP) fraud up to a maximum of £85,000 if these individuals The affected person is tricked or psychologically manipulated into handing over cash.
APP scams are a form of fraud in which criminals try to convince people to send them money by impersonating individuals or businesses selling services.
The £85,000 refund could prove costly for big banks and payments companies. However, it is actually lower than the £415,000 mandatory repayment amount previously proposed by the UK’s Payment Systems Regulator (PSR).
PSR abandoned its push for a high maximum compensation payout after industry backlash, with industry group the Payments Association in particular saying it would be too costly for the financial services industry to pay. can bear it.
But now that mandatory fraud compensation is being rolled out in the UK, questions are being raised about whether financial firms will face the cost burden of helping fraud victims. or not.
On Thursday, London-based digital bank Revolut accused Meta falling into a “severe shortage of what is needed to tackle fraud globally.” Facebook owner announced the partnership earlier this week with UK lenders NatWest and Metro Bank, to share intelligence on fraudulent activity taking place on its platforms.
Woody Malouf, head of financial crime at Revolut, said that Meta and other social media platforms will help cover the costs of refunding scam victims and by not sharing responsibility for doing so as such, “they have no incentive to do anything about it.”
Revolut’s call for major tech platforms to financially compensate those defrauded on their sites and apps is not new.
Proposal to hold technology companies accountable
Tensions have been running high between banks and tech companies for some time. Online fraud has increased significantly over the past few years due to the increased use of digital platforms to pay others and buy products online.
In June, The Financial Times reported that the Labor Party has drawn up proposals to force tech companies to compensate victims of fraud originating on their platforms. It’s unclear whether the government still plans to require tech companies to compensate victims of APP fraud.
A government spokesperson was not immediately available for comment when contacted by CNBC.
Matt Akroyd, commercial litigation lawyer at Stewarts, told CNBC that, following their victory in lowering the maximum refund limit for APP fraud to £85,000, banks “will receive a another push if the push for the government to place some legal responsibility on tech companies is also successful.”
However, he added: “The question of which regulatory regime can apply to companies that do not play an active role in the PSR’s payments system, and how, means this issue is unlikely can be resolved soon.”
More broadly, banks and regulators have long pushed social media firms to cooperate more with UK retail banks to help combat the rapidly growing threat of fraud. and constantly evolving. A key requirement is for tech companies to share more detailed intelligence about how criminals abuse their platforms.
At a UK financial industry event focusing on economic fraud in March 2023, regulators and law enforcement highlighted the need for social media companies to do more .
Kate Fitzgerald, head of policy at PSR, told event attendees: “We heard anecdotally today from all the companies we spoke to that much of this fraud originates from social media platforms”.
She added that there needs to be “absolute transparency” about where fraud is occurring so regulators can know where to focus their efforts in the value chain.
Social media companies not doing enough to combat and eliminate attempts to defraud internet users was another complaint from regulators at the event.
Rob Jones, director general of the National Economic Crime Centre, a unit of the UK National Crime Agency, said at the event: “What is missing is the scale social media companies are taking down accounts suspected of being related to fraud.”
Jones added that it’s difficult to “break the inertia” at tech companies to “really get them to pursue it.”
Tech companies promote ‘cross-industry collaboration’
Meta has rejected suggestions that it should be responsible for compensating victims of APP fraud.
In written evidence to a parliamentary committee last year, the social media giant said that UK banks were “too focused on efforts to shift liability for fraud to other industries”. , adding that this “creates a hostile environment that benefits them.” of scammers.”
The company said it can use intelligence directly from major banks through its Fraud Information Reciprocal Exchange (FIRE) initiative to help prevent fraud and develop and improve Improve AI detection and machine learning systems. Meta called on the government to “encourage more cross-sector collaboration like this”.
In a statement to CNBC on Thursday, the tech giant emphasized that banks, including Revolut, should look to partner with Meta on its FIRE framework to facilitate data exchange between companies and major lenders.
FIRE “is designed to allow banks to share information so we can work together to protect everyone using our respective services,” a Meta spokesperson said this week before. “Fraud is a problem that spans many sectors and can only be solved by working together.”
