Social media companies that advertise fraudulent firms and financial scams should be held accountable for reimbursing victims, according to testimony given at an Oireachtas committee meeting. The Central Bank of Ireland highlighted the growing threat of authorised push payment (APP) fraud, a technique in which victims are deceived into making payments to fraudster accounts. This type of fraud has become more prevalent during the pandemic and differs from unauthorised fraud, as victims actively transfer money to fraudulent entities. Currently, financial institutions are only liable to compensate victims of unauthorised payment fraud, with no liability set out for APP fraud under existing legislation.
Colm Kincaid, Director of Consumer Protection at the Central Bank of Ireland, spoke at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and Taoiseach, expressing the bank’s support for proposals to extend the liability of payment service providers to include APP fraud cases. This would include situations where an IBAN discrepancy is detected but not notified to the payer, as well as cases involving the impersonation of a bank employee. Kincaid called for an inter-industry approach to combat APP fraud and suggested that social media companies and other communication mechanisms through which the fraud is carried out should also be considered responsible for compensating victims.
Kincaid stated that approximately 80% of APP fraud instances begin with online advertisements that are frequently circulated on various social media platforms. Pearse Doherty, a Sinn Féin TD, highlighted the responsibility of social media firms in the UK to compensate victims of fraudulent advertising and urged for all actors, including commercial entities, to be involved in tackling the issue. Kincaid also emphasized that banks and financial institutions should be held accountable, especially when internal faults contribute to the success of a scam. He stated that firms should compensate consumers if their losses result from a failure of the firm’s own systems and controls, and that effective systems must be in place to identify and prevent fraud while supporting victims.
Doherty called for cohesion across the Irish banking sector and criticized the fragmented processes by which fraud is reported by key institutions. He highlighted the differences in reporting fraud to the Gardai among the three main lenders, with Bank of Ireland reporting everything and AIB only reporting what they are liable for. Doherty described this discrepancy as “crazy.” Kincaid echoed the need for a coordinated approach, acknowledging the sophisticated and multi-dimensional nature of APP fraud. He emphasized that combatting fraudsters would require collective action from all parties involved.
In conclusion, the Oireachtas committee meeting shed light on the need to hold social media companies accountable for advertising fraudulent firms and financial scams. The Central Bank of Ireland expressed support for extending the liability of payment service providers to include APP fraud cases. The committee also emphasized the responsibility of banks and financial institutions to compensate victims, particularly when internal faults contribute to the success of a scam. A coordinated approach involving all parties is necessary to effectively combat APP fraud and protect consumers from falling victim to these schemes.