Meta is facing calls from UK banks and payments companies such as Revolut to financially compensate people who fall for scams using their services.
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Tensions are escalating between banking, payments and social media companies in Britain over who should be liable for compensating people when they fall victim to online fraud.
From October 7, banks will have to start compensating victims of so-called Authorized Push Payment (APP) fraud up to a maximum of £85,000 if the people affected were tricked or psychologically manipulated into handing over the money.
APP fraud is a form of scam where criminals try to convince people to send them money by pretending to be people or companies selling a service.
The £85,000 refund amount could be expensive for major banks and payments companies. However, it is actually lower than the mandatory refund amount of £415,000 that the UK Payment Systems Regulator (PSR) had previously proposed.
The PSR withdrew from its bid for the lofty maximum compensation payout after opposition from the sector, with sector group the Payments Association in particular saying this would be far too expensive a sum for the financial sector to bear.
But as mandatory fraud compensation is introduced in Britain, questions are being asked about whether financial firms will bear the brunt of the costs of helping fraud victims.
The London-based digital bank Revolut accused this on Thursday Meta of ‘failing woefully in what is needed to tackle fraud worldwide’. The Facebook owner announced a partnership with British lenders earlier this week NatWest and Metro Bank, to share information about fraud activities taking place on its platforms.
Woody Malouf, head of financial crime at Revolut, said Meta and other social media platforms should help cover the costs of compensating fraud victims and that by not sharing responsibility in the process, they “have no incentive to do anything about it.” doing.”
Revolut’s call for major tech platforms to financially compensate people who fall for scams on their websites and apps is not new.
Proposals to hold technology companies accountable
Tensions between banks and technology companies have been running high for some time. Online fraud has increased dramatically in recent years due to an acceleration in the use of digital platforms to pay others and purchase products online.
In June the The Financial Times reports this that the Labor Party had drawn up proposals to force tech companies to reimburse victims of fraud that originated on their platforms. It is not clear whether the government still plans to require tech companies to pay compensation to victims of APP fraud.
A government spokesperson was not immediately available for comment when contacted by CNBC.
Matt Akroyd, a commercial litigation lawyer at Stewarts, told CNBC that, following their victory in lowering the maximum repayment limit for APP fraud to £85,000, the banks “will get a further boost as their efforts to challenge the government to impose some regulatory liability on Technology companies are also successful.”
However, he added: “The question of which regulatory regime could cover those companies that do not play an active role in the PSR payment systems, and how, is complex, meaning this issue is unlikely to be resolved quickly.”
More broadly, banks and regulators have long been pushing social media companies for greater cooperation with retail banks in Britain to help combat the fast-growing and ever-evolving fraud threat. An important request for the technology companies was to share more detailed information about how criminals abuse their platforms.
At a March 2023 UK financial industry event focused on economic fraud, regulators and law enforcement emphasized the need for social media companies to do more.
“We’re hearing anecdotally these days from all the companies we talk to that a lot of this fraud is coming from social media platforms,” Kate Fitzgerald, head of policy at the PSR, told event attendees.
She added that there needed to be “absolute transparency” about where the fraud was taking place so that regulators could know where to focus their efforts along the value chain.
Another complaint from regulators at the event was that social media companies were not doing enough to combat and remove attempts to defraud Internet users.
“What is missing is the big social media companies taking down suspected accounts involved in fraud,” Rob Jones, director general of the National Economic Crime Centre, a division of Britain’s National Crime Agency, said at the event.
Jones added that it was difficult to “break the inertia” at tech companies and “really get them behind it.”
Technology companies encourage ‘cross-sector collaboration’
Meta has pushed back on suggestions that it should be held liable for paying compensation to victims of APP fraud.
Last year, the social media giant said in written evidence to a parliamentary committee that banks in Britain are “too focused on their efforts to transfer liability for fraud to other sectors”, adding that this “creates a hostile environment that is playing cards of fraudsters.”
The company said it can use live information from major banks through its Fraud Intelligence Reciprocal Exchange (FIRE) initiative to help stop fraud and develop and improve its machine learning and AI detection systems. Meta called on the government to “encourage more cross-sector collaboration in this way.”
In a statement to CNBC Thursday, the tech giant emphasized that banks, including Revolut, should look to join forces with Meta on its FIRE framework to facilitate data exchange between the company and major lenders.
FIRE “is designed to enable banks to share information so we can work together to protect people who use our respective services,” a Meta spokesperson said last week. “Fraud is a multi-sector problem that can only be tackled by working together.”