In the UK, disputes about who should pay out compensation to victims of online fraud are getting worse between social media companies, banks, and payment processors.
Banks must begin paying victims of so-called authorised push payment (APP) fraud a maximum of £85,000 as of October 7. This is only applicable if the victims were duped or psychologically coerced into turning over the money.
App fraud is a type of scam in which scammers pose as people or companies offering services in an effort to get victims to submit money.
The £85,000 reimbursement amount can be expensive for big banks and payment companies. It is, however, less than the obligatory £415,000 refund that the Payment Systems Regulator (PSR) of the United Kingdom had earlier suggested.
After facing criticism from the industry, the PSR withdrew its request for the enormous maximum compensation payout. The Payments Association, in particular, said the amount would be too high for the financial services industry to handle.
However, concerns are being raised about whether financial firms are bearing the majority of the expense of assisting fraud victims now that obligatory fraud compensation is being implemented in the United Kingdom.
Digital bank Revolut, based in London, charged on Thursday that Meta was “woefully short of what’s required to tackle fraud globally.” The owner of Facebook stated earlier this week that it will be sharing intelligence on fraud activities on its platforms with U.K. lenders, Metro Bank and NatWest.
Revolut’s head of financial crime, Woody Malouf, stated that Meta and other social media platforms have to contribute to the expense of compensating fraud victims because, if they don’t shoulder any of the burden, “they have no incentive to do anything about it.”
It’s not new for Revolut to demand that major internet companies pay out cash compensation to users who fell for scams on their websites and apps.
Proposals to hold tech firms responsible
For a while now, there has been a lot of tension between banks and digital companies. The last several years have seen a sharp increase in online fraud since more people are using digital platforms to make payments and make purchases.
The Labour Party has draughted bills to compel tech companies to compensate victims of fraud that begins on their platforms, according to a June Financial Times report. It’s unclear if the government still intends to mandate that tech companies compensate APP scam victims.
When CNBC contacted a government representative, they were not immediately available for comment.
Stewarts’ Matt Akroyd, a commercial litigation attorney, told CNBC that banks “will receive another boost if their efforts to push the government to place some regulatory liability on tech companies is also successful.” This is in addition to their victory in lowering the maximum reimbursement limit for APP fraud to £85,000.
“The question of what regulatory regime could cover those companies who do not play an active role in the PSR’s payment systems, and how, is complicated, meaning that this issue is not likely to be resolved any time soon,” the speaker continued.
In a broader sense, banks and regulators have long pushed social media businesses to work more closely with retail banks in the UK in order to assist fight the rapidly expanding and ever-changing fraud threat. The digital companies have been urged to provide more in-depth information about the ways in which criminals are abusing their platforms.
In March 2023, regulators and law enforcement emphasised the need for social media companies to take more action during a banking industry gathering in the United Kingdom that focused on economic fraud.
Kate Fitzgerald, head of policy at the PSR, told delegates, “We hear anecdotally today from all of the firms that we talk to, that a large proportion of this fraud originates from social media platforms.”
“Absolute transparency” regarding the fraud’s location was required, she continued, in order for authorities to know where in the value chain to concentrate their efforts.
Regulatory authorities at the event also expressed dissatisfaction with social media corporations’ perceived lack of action in stopping and eliminating attempts to swindle internet users.
The director general of the National Economic Crime Centre, a division of the U.K. National Crime Agency, Rob Jones, stated during the event that “the bit that’s missing is the at-scale social media companies taking down suspect accounts that are involved in fraud.”
In order to “really get them to get after it,” Jones continued, it was difficult to “break the inertia” at tech corporations.
