The Financial Services Commission introduced a set of measures intended to strengthen anti-vishing capabilities in the financial sector on August 28. The measures are part of the government’s comprehensive plan to root out vishing scams announced earlier on the same day.
Key Measures
I. Introduce Liability of Compensation and Strengthen Response Capabilities
The government plans to introduce liability of compensation in legislation for the loss incurred in part or in whole resulting from a vishing scam for those entities that bear the responsibility of preventing vishing scams, such as financial companies. With the advent of AI technologies in crimes and the use of stolen personal data in highly manipulative and psychologically domineering ways, the methods used by vishing perpetrators these days show that they are advancing evermore rapidly. In this regard, practice of caution by individuals alone cannot effectively prevent damages, and that it is now time to more systematically and proactively respond to vishing scams through strengthening the responsibility of financial companies that are equipped with the needed expertise and infrastructure, such as fraud detection system (FDS).
Earlier in January 2024, financial companies had adopted standards for providing compensation for loss incurred in online or mobile financial frauds on a voluntary basis. However, compensations were provided only under specific conditions (e.g. use of fraudulent passwords) on a restricted basis, which had limited impact on the overall improvement of anti-vishing efforts across the financial industry.
Thus, once the liability of compensation clause is put into legislation, victims of vishing scams will be able to receive at least a certain level of compensation from financial companies even if the transfer of money which led to financial loss was carried out by the victim him/herself under duplicitous circumstances. Making financial companies liable to compensation will also provide them with reasons to improve their own FDS and anti-vishing staff capacities in more proactive ways.
The financial authorities are closely working with financial companies to decide on the specifics of compensation liability, such as the requirement for compensation, limit, procedure, etc. The authorities are also working with the investigative agencies to facilitate information sharing between them to prevent the problem of false reports or moral hazard. Based on these collaborative efforts, the authorities will seek a revision of the Special Act on the Prevention of Loss Caused by Telecommunications-based Financial Fraud and Refund for Loss (“the Special Act” hereinafter) within this year.
In addition, financial companies will be required to have an internal division specifically charged with overseeing anti-vishing and response activities staffed with professionals equipped with relevant expertise. In the meantime, the Financial Supervisory Service (FSS) will have authority to examine the anti-vishing capabilities of financial companies and request corrective actions when deemed necessary.
II. Establish Anti-vishing AI Platform
The authorities will work to promptly set up an anti-vishing AI platform to facilitate financial companies to more effectively and proactively detect fraudulent account activities and freeze payments from these accounts in advance before any loss is incurred to victims.
The anti-vishing AI platform will collect relevant data and information on vishing scams from across all financial companies, telecommunication service providers, and investigative authorities for analysis using AI and disseminate the result of AI analytics to all participating organizations to be put to use in various ways of vishing fraud and loss prevention efforts.
Through this platform, the nonbank financial sectors that have been relatively less capable of detecting fraudulent activities in advance will also be able to more effectively freeze payments from the accounts suspected to be involved in illegal activities. This will help to prevent potential victims and help the nonbank sectors to fend off criminal activities more effectively. The use of AI analytics by telecom service providers and investigative authorities is expected to lead to the introduction and development of new anti-vishing telecom services and investigation strategies.
The standardized and computerized form of information and data sharing will facilitate more swift responses by relevant authorities as the platform is expected to help boost cooperation and coordination between financial companies, telecom service providers, and investigative authorities.
The platform will be initially launched under the current legislative framework. However, an exemption provision will be sought in the Special Act to authorize the sharing of certain personal information to facilitate a more efficient operation of the platform.
After continuing to have working-level coordination, setting up a computer system, and upgrading relevant rules, the authorities will seek to launch the anti-vishing AI platform as early as in October this year.
III. Bolster Responses against Vishing Scams Involving Virtual Assets
The authorities will seek improvements to close regulatory loopholes in vulnerable areas, such as the involvement of virtual asset accounts and open banking services in vishing scams.
Until now, virtual asset exchange service providers—unlike financial companies or electronic financial service providers—were not legally obligated to have preventive mechanisms, such as fraud detection system (FDS) or suspension of payment for vishing scams. Thus, it has been pointed out that vishing scams involving virtual asset accounts are taking place in more frequent numbers.
Against this backdrop, the authorities plan to seek a revision of the Special Act to make virtual asset exchange service providers legally obligated to the FDS, verification of transaction purpose, suspension of payment, and compensation of loss requirements in vishing scams.
In addition, similar to the safe block prevention system previously introduced for credit transactions and online or mobile account opening services, the authorities will set up a safe block prevention system for open banking services to avert the transfer of money through open banking in vishing scams.
IV. Pursue Public Campaign on Anti-vishing
Through close cooperation and coordination between all government ministries, the authorities will make active efforts to carry out public advertisement campaign on anti-vishing efforts to raise public awareness about the danger of vishing attacks and the latest methods of scams used by perpetrators.
The financial authorities and financial industry groups plan to create effective public advertisement content in collaboration with notable experts and online influencers, while preparing a set of how-to guides to help the public better deal with the latest methods of vishing scams. There will also be continuous efforts to boost public advertisement campaign to raise awareness about vishing scams through easily accessible venues and channels, such as financial company branches and billboard advertisement.
The authorities will continue to closely listen to the voices on the ground to seek improvements in anti-vishing efforts. A series of meetings with anti-vishing experts will be held to find new policy tasks. Tentatively scheduled for October-November, there will be a venue for victims of vishing scams and real-time responders to share their ideas and suggestions for making improvements. Moreover, in coordination with the financial sector, psychological counseling services will also be made available to victims of vishing scams.
* Please refer to the attached PDF for details.