HKMA Consults on Framework for Banks to Share Scam-Related Losses

HKMA's Initiative on Scam-Related Loss Sharing

The Hong Kong Monetary Authority (HKMA) has announced it will initiate an industry consultation on a “responsibility framework” that focuses on scams, paving the way for banks to share losses with vulnerable customer groups affected by such fraudulent transactions.

Unlike financial fraud which refers to hacking and unauthorized access, this framework is designed to cover scams that deceive individuals into sharing personal information, leading to financial loss. Arthur Yuen Kwok-hang, HKMA Deputy CEO, stressed the necessity of clear guiding principles that banks should evaluate regarding compensation decisions.

Factors for Evaluating Scam Losses

• The effectiveness of banks’ control systems
• Customer diligence in safeguarding personal information
• Special circumstances of vulnerable customers

In the first half of this year, HKMA reported a staggering 67% rise in fraud losses, amounting to approximately HK$4.5 billion (US$575 million). Despite this rise, it was noted that banks are stepping up in their responsibility and reimbursement efforts. The number of fraud complaints has decreased by 65%, while scam complaints rose by 16%. Yuen highlighted that scams are becoming a more pressing issue that needs urgent attention.

International Models of Responsibility Frameworks

Countries like Australia and Singapore are taking similar steps to mitigate scams by imposing regulations on banks to assume responsibility. They are also working on initiatives like Money Safe, allowing customers to lock parts of their accounts to prevent unauthorized transactions, which promotes customer agency.

This consultation represents a significant move to establish a clearer responsibility framework for banks operating in Hong Kong, ultimately fostering improved customer protection against scams.