Asked if Singapore's proposed shared responsibility framework for phishing scams could give banks and telcos a "free pass", Minister of State for Trade and Industry Alvin Tan reiterated the need to guard against moral hazard.
"I have heard feedback, even from the general public, that it would not be fair for the financial institutions, telcos, and ultimately the wider group of customers who have exercised care, to have to bear the cost of compensating the scam losses from authorised transactions," he said in Parliament on Tuesday (Nov 7).
He was responding to Workers' Party chairperson Sylvia Lim, who asked if the waterfall approach — which places the responsibility on financial institutions (FIs) to bear the full loss first, followed by the telcos — could be seen as giving FIs and telcos a "free pass".
As long as banks and telcos fulfil their prescribed duties laid out in the framework, they will not have to bear losses from scams. FIs have four duties, while telcos have three.
To this, Tan noted that the shared responsibility framework does not cover authorised transactions in which victims are tricked into willingly handing over money.
The best approach for these would be to raise public awareness on the issue through education, he said.
If authorised transactions were covered, there would be a risk of moral hazard, incentivising consumers to let their guard down. The government also wants to guard against consumers "potentially also working in cahoots with scammers to defraud banks".
Instead, the framework covers scams involving unauthorised transactions, which take place primarily without the victims' knowledge or consent — which is why, in the waterfall approach, responsibility is placed on FIs in the first instance and then on telcos, to safeguard consumers, he said.
Jurong GRC MP Tan Wu Meng raised a supplementary question on physical bank tokens, which have largely been phased out.
Noting that some of his constituents had been scammed, he said: "These residents didn't ask to be transitioned to OTP (one-time password) SMS or digital tokens. They didn't ask to have all their risk concentrated in a single device."
He asked if, under the new framework, banks would take into account these new norms of digital security in their goodwill consideration.
Alvin Tan replied that physical tokens are still available upon request at bank branches, but acknowledged there could be some "friction" in the process of requesting and receiving these tokens.
He added that the Monetary Authority of Singapore will work with banks to make the process easier.
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This article was first published in The Business Times. Permission required for reproduction.