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Meta is facing calls from UK banks and payments firms like Revolut to financially compensate people who fall for scams on their services.
Jaap Arriens | Nurphoto via Getty Images
Tensions are growing between banking and payments firms and social media companies in the UK over who should be responsible for compensating people who fall victim to online fraud schemes.
From October 7, banks will be required to start compensating victims of so-called Authorized Push Payment (APP) fraud up to £85,000 if those affected were deceived or psychologically manipulated into that they return the money.
APP fraud is a form of scam in which criminals try to convince people to send them money by posing as people or companies selling a service.
The £85,000 refund amount could prove costly for big banks and payment companies. However, it is actually lower than the mandatory repayment amount of £415,000 previously proposed by the UK’s Payment Systems Regulator (PSR).
The PSR backed away from its maximum compensation offer following backlash from the industry, with industry group Payments Association in particular saying it would be far too costly a sum for the financial services sector to bear.
But now that mandatory fraud compensation is being introduced in the UK, questions are being raised over whether financial firms are bearing the bulk of the costs of helping fraud victims.
On Thursday, London-based digital bank Revolut accused Meta of falling “woefully short of what is needed to combat fraud on a global scale.” The Facebook owner announced a partnership earlier this week with UK lenders. NatWest and Metro Bank, to share intelligence on fraudulent 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 cost of reimbursing fraud victims and that, by not sharing any responsibility in this area, “they are not have no incentive to do anything about it.
Revolut’s call for big tech platforms to financially compensate people who fall victim to scams on their websites and apps is not new.
Proposals to hold tech companies accountable
Tensions have been high for some time between banks and technology companies. Online fraud has increased significantly in recent years due to the accelerated use of digital platforms to pay others and purchase products online.
In June, the The Financial Times reported that the Labor Party had drawn up proposals to force tech companies to reimburse victims of fraud originating from their platforms. It is unclear 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 after their victory in lowering the maximum reimbursement cap for APP fraud to £85,000, banks “will receive another boost if their efforts to push government to impose some regulatory responsibility on banks “technology companies are also successful.”
However, he added: “The question of what regulatory regime could cover businesses that do not play an active role in PSR payment systems, and how, is complicated, meaning it is unlikely that this question be resolved soon. »
More broadly, banks and regulators have long been pushing for social media companies to collaborate more with UK retail banks to combat the rapidly growing and evolving threat of fraud. A key demand has been for tech companies to share more detailed information about how criminals abuse their platforms.
At a UK financial sector event focused on economic fraud in March 2023, regulators and law enforcement highlighted the need for social media companies to do more.
“We’re hearing anecdotally today, from every company we talk to, that a lot of this fraud is coming from social media platforms,” Kate Fitzgerald, head of policy at PSR, told reporters. participants in the event.
She added that “absolute transparency” was needed about where fraud was occurring so regulators could know where to focus their efforts in the value chain.
Social media companies are not doing enough to combat and eliminate attempts to defraud Internet users, was another complaint from regulators at the event.
“What’s missing is large-scale social media companies removing suspicious accounts involved in fraud,” said Rob Jones, director general of the National Economic Crime Centre, a unit of the UK’s National Crime Agency , during the event.
Jones added that it was difficult to “break the inertia” of tech companies to “really get them to go after them.”
Tech companies promote “cross-sector collaboration”
Meta has pushed back against suggestions that it should be held responsible for paying compensation to victims of APP fraud.
In written testimony to a parliamentary committee last year, the social media giant said UK banks were “too focused on shifting responsibility for fraud to other sectors”, adding that this “creates a hostile environment that plays into the hands of fraudsters.”
The company said it can use live intelligence from major banks through its Fraud Intelligence Reciprocal Exchange (FIRE) initiative to help stop fraud and evolve and improve its machine learning and detection systems. of AI. Meta called on the government to “encourage more cross-sector collaboration like this”.
In a statement to CNBC on Thursday, the tech giant highlighted that banks including Revolut should look to join forces with Meta on its FIRE framework to facilitate data exchanges between the company and large lenders.
FIRE “is designed to allow banks to share information so that we can work together to protect people using our respective services,” a Meta spokesperson said last week. “Fraud is a multi-sector problem that can only be solved by working collaboratively.”