The government is coordinating final opinions with the industry over legislation for a "no-fault liability" system that would require financial companies to compensate part or all of voice phishing losses. The government is reviewing broad recognition of exemption clauses for financial companies that fulfilled their obligations to prevent voice phishing and criminal penalties for false compensation claims. Still, differing views within some political circles on the no-fault liability system suggest the bill will face a bumpy road.
According to the financial sector on Dec. 1, the financial authorities and financial companies are discussing the scope of compensation and exemption clauses for financial companies after voice phishing occurs through a task force (TF). The Financial Services Commission (FSC) plans to submit related amendments to the National Assembly within the year based on the coordinated details.
The scope of exemption would allow financial companies to bear no or only partial liability when they have fulfilled their obligation to prevent voice phishing. For example, if a financial company detected a possibility of voice phishing and advised the customer not to remit funds, but the customer ignored the warning and sent the money, the firm may not be liable for compensation. A measure to allow financial companies to receive investigative information from the police to verify the facts related to compensation liability is also under discussion.
The financial authorities initially sought a plan to compensate up to 100% of voice phishing losses, but banks are reportedly pushing back. Banks say that, upon legal review, 100% compensation runs counter to the civil law principle of "fault-based liability." Fault-based liability is a principle that imposes liability for damages only for harmful acts committed intentionally or negligently.
Some also say it is not equitable for only financial companies to bear liability for voice phishing crimes, as responsibility may also lie with telecom operators and investigative agencies. A banking industry official said, "If excessive compensation liability is imposed on financial companies, people may feel reassured and send money to criminal groups, which could backfire and increase related crimes."
The TF is considering ways to enable compensation without causing moral hazard. It is also pursuing criminal penalties for filing false compensation claims.
It is uncertain whether a bill containing the no-fault liability system will clear the National Assembly. Within the People Power Party, some say, "Imposing compensation liability on financial companies without intent or negligence could conflict with the principle of fault-based liability," arguing potential illegality. The People Power Party plans to closely review the details when the Financial Services Commission (FSC) introduces the amendments.