Financial companies may shoulder some responsibility for voice phishing scams

[Photo by MK DB]

Financial companies may have to compensate for fraud damages in voice phishing scams under a new system introduced by the South Korean government that has declared a war against cyber-attack schemes.

According to multiple industry sources on Monday, financial authorities are considering introducing a measure that requires financial companies to reimburse part of the damages depending on an assessment of their effort to prevent voice phishing.

Currently, victims of voice phishing scams bear most of the damages as they are considered to have leaked their own personal information such as passwords.

Financial companies are held accountable only if they do not comply with security procedures. They had been off the hook if identity or transaction purposes were simply verified.

The number of banking-related voice phishing complaints filed with the Financial Supervisory Service (FSS) reached 1,879 last year, up by more than 30 percent from 1,444 a year ago.

Under the new system, voice phishing damages will be shared between financial companies and customers according to a compensation rate determined by examining how well they complied with the voice phishing prevention guidelines.

Victims of voice phishing hardly recover the damages from crime organizations.

According to FSS, the amount of recovery last year was 37.9 billion won ($28.2 million), which was only 26.1 percent of the entire damages. This means more than 7 out of 10 people are losing money without any remedies to recoup their losses.

The total amount of voice phishing damages, in the meantime, is on a decline.

The amount plunged to 168.2 billion won in 2021 and 145.1 billion won in 2022 from 444 billion won in 2018 and 672 billion won in 2019.

The average per-capita damage, however, has rather increased to 12.3 million won last year from 9.1 million won in 2018.

Criminals are resorting to malicious methods such as even stealing money from other bank accounts by abusing the open banking system and secretly creating a mobile phone account to take out online loans.

Caution is required as the surge in damages mostly come from scams impersonating acquaintances or family members instead of the previously prevalent loan scams.

The damages from loan fraud were 156.5 billion won and impersonation fraud 78.7 billion won in 2020. But the latter soared to 114 billion won while the former fell to 31.1 billion won last year.

Experts advise on the need for intensive preventive education for the older generation as 46.7 percent of victims are aged above 60 and 33.1 percent above 50.

Financial companies are implementing various voice phishing prevention policies of their own. Insiders believe that the government’s latest move will prompt financial companies to strengthen their activities for the prevention of financial fraud.