Government: "Financial Institutions to Compensate Part of Voice Phishing Losses"

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The government is moving to legislate a no-fault compensation liability for voice phishing, which would require financial institutions to compensate victims for losses caused by voice phishing within a certain scope.

The Financial Services Commission and the Financial Supervisory Service announced the "Comprehensive Plan to Eradicate Voice Phishing" at the Government Complex Seoul on August 28, stating that they will pursue the legislation of a "no-fault compensation liability for voice phishing." This would require entities responsible for preventing voice phishing, such as financial companies, to compensate for part or all of the damages suffered by victims.

The government explained that this move is based on the recognition that, as voice phishing schemes are rapidly becoming more sophisticated, it is no longer possible to prevent damages through individual vigilance alone. Therefore, financial institutions with a high level of expertise must take responsibility and respond proactively.

Previously, the financial sector has voluntarily compensated victims of voice phishing under the "Non-face-to-face Financial Accident Liability Sharing Standards." However, compensation has been limited to cases involving unauthorized remittance or transfer due to password tampering by third parties, which has led to criticism that these measures have not resulted in substantial relief for victims or significantly enhanced efforts across the financial sector to prevent voice phishing.

The Financial Services Commission expects that, once the no-fault compensation liability for voice phishing is legislated, financial institutions will be required to compensate victims within a certain scope even in cases where the victim was deceived by a voice phishing criminal and transferred funds directly. This is anticipated to provide broader and more substantial relief for victims. The Commission also expects that incentives, such as the advancement of abnormal financial transaction detection systems (FDS) and the expansion of dedicated personnel for proactive prevention, will have a significant effect in preventing damages.

The Financial Services Commission is closely discussing with the financial sector the specific details of the no-fault compensation liability system, including compensation requirements, limits, and procedures. It is also working with investigative authorities to discuss measures for information sharing to verify damages and prevent side effects such as false reports or moral hazard. Based on these discussions, the Commission explained that it plans to ensure the enactment of the Telecommunications Fraud Damage Refund Act within this year.

In addition, the government announced that it will swiftly establish a "Voice Phishing AI Platform" (tentative name) so that financial institutions can effectively detect suspicious accounts and suspend payments before damages occur. The platform will aggregate and share voice phishing-related information held by all financial institutions, telecommunications companies, and investigative agencies, and AI-based analysis results will be distributed to all participating organizations.

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