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If a digital scam causes a depositor to lose money, the bank will pay: SBP

KARACHI: The State Bank has told banks that they will be responsible for account holders’ lost money if they don’t take steps to stop social engineering and other digital banking frauds on time.

In a statement released on Thursday, the central bank said, “Banks are required to compensate customers for delays in taking timely corrective and control measures, such as blocking digital channels, filing dispute requests, etc.”

A banking ombudsman’s study shows that the number of complaints about fraud, especially about digital transactions, has been going up quickly.

The State Bank of Pakistan (SBP) has now told commercial banks and private banks to improve their controls and processes for protecting against digital fraud. This is to stop social engineering and other types of digital banking fraud.

It said that banks would be responsible if customer money was lost because they didn’t act quickly enough to fix problems and keep things under control.

“These new measures are part of a larger SBP goal to improve digital financial inclusion and promote digital financial services by building customer trust in the safety, security, and soundness of the digital banking ecosystem,” it said.

“As more and more people in Pakistan use digital banking, fraudsters have been taking advantage of customers’ lack of knowledge,” it said.

The SBP said it was always talking with the banking industry and other interested parties to come up with ways to stop sophisticated fraud schemes like spoofing of banks’ official helpline numbers, SIM swap attacks, identity theft, false registrations, etc. The SBP and banks were also working on a program to educate customers.

The SBP released a new set of detailed rules for making digital banking goods and services safer.

It said, “These guidelines set up a full control system for banks to use by December 31, 2023.”

The new rules say that financial institutions can’t make a policy to protect their account users from digital fraud and make sure that policy is effectively communicated.

So, they will create, review, and keep making improvements to end-to-end processes for managing digital fraud risk and customer complaints in collaboration with the right people.

In one of the most important steps to stop fraudulently transferred funds from leaving the banking system, the SBP has told banks that offer branchless banking wallets to stop cash-out, mobile top-up, and other online purchases for two hours when incoming funds are transferred.