Responsibility for social media firms promoting fraudulent ads to reimburse victims

An Oireachtas committee has heard that the vast majority of fraud instances begin with online advertisements

The committee heard of the increasing prevalence of APP fraud, 80% of which begins on social media 

Social media companies found to advertise fraudulent firms and financial scams should be considered as liable for reimbursing victims, an Oireachtas committee has heard.

Speaking at the meeting, The Central Bank of Ireland highlighted the growing threat of authorised push payment (APP) fraud - a technique whereby victims are tricked into making payments to fraudster accounts.

Becoming particularly prevalent since the pandemic, it differs from fraud which is unauthorised, whereby victims do not actively transfer money themselves to fraudulent entities.

Currently, financial institutions are only liable to compensate victims of unauthorised payment fraud, with the existing legislative framework not setting out any liability for APP fraud.

Speaking at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and Taoiseach, Director of Consumer Protection at the Central Bank of Ireland, Colm Kincaid said the bank welcomed proposals to extend the liability of payment service providers to include the case of authorised push payment fraud.

This included when an IBAN discrepancy is detected but not notified to the payer and where the fraud involves the impersonation of a bank employee.

Co-ordinated approach

Calling for a inter-industry approach to combatting APP fraud, Mr Kincaid added that social media companies and other communication mechanisms through which APP fraud is carried should also be considered when determining who should bear the cost for victims.

According to Mr Kincaid, around 80% of APP fraud instances begin with online advertisements which are frequently circulated across various social media platforms. 

Speaking at the committee, Sinn Féin TD, Pearse Doherty noted the onus on social media firms that accept fraudulent advertising in the UK to compensate victims, with Mr Kincaid adding that all actors, including commercial entities should be involved in tackling the issue.

Onus on financial institutions

However, the Consumer Protection Director also noted that banks and financial institutions should be considered, especially when an internal fault contributes to the success of a scam.

"We also expect firms to take responsibility to compensate consumers to any extent a consumer’s loss has resulted from a failure of the firm’s own established systems and controls," added Mr Kincaid. "They must have effective systems in place to identify and prevent fraud and they must support consumers who fall victim to it."

Also noting the need for a co-ordinated approach, Mr Doherty called for cohesion throughout the Irish banking sector, noting the fragmented processes by which fraud is reported across Ireland's key institutions.

"We are told by the three main lenders that they all have a different approach to reporting fraud to the Gardai," said Mr Doherty. "Bank of Ireland reports everything, AIB only report what they are liable for - that is crazy."

Noting the "sophisticated and multi-dimensional nature," of APP fraud, Mr Kincaid added, "Fraudsters prey on consumer vulnerabilities. Combatting such bad actors will require all parties to act together."