Meta is facing calls from UK banks and payment companies such as Revolut to financially compensate people who fall victim to fraud on their services.
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Tensions are rising between banking companies, payment companies and social media companies in the UK over who should be responsible for compensating people if they fall victim to online fraud schemes.
From October 7, banks will be required to start compensating victims of so-called Approved Payment (APP) fraud up to a maximum of £85,000 if those affected individuals were tricked or psychologically manipulated into handing over cash.
APP fraud is a form of fraud where criminals try to convince people to send them money by impersonating individuals or companies selling a service.
The £85,000 repayment amount may be expensive for large banks and payment companies. However, it is actually lower than the mandatory repayment amount of £415,000 previously proposed by the UK Payment Systems Regulator (PSR).
PSR backed down from its bid for the maximum payout after backlash from the industry, with industry group the Payments Association in particular saying such a sum would be too expensive for the financial services sector to bear.
But now that mandatory fraud compensation has come into effect in the UK, questions are being raised about whether financial companies face the brunt of the costs of helping fraud victims.
On Thursday, London-based digital bank Revolut was charged dead It falls “woefully short of what is needed to address fraud globally.” The Facebook owner announced a partnership earlier this week with lenders in the UK NatWest and Metro Bank, to share information about fraudulent activities occurring on its platforms.
Woody Maalouf, head of financial crimes at Revolut, said Meta and other social media platforms must help cover the cost of compensating fraud victims, and that by taking no responsibility in doing so, they “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 nothing new.
Proposals to make technology companies accountable
Tensions have been rising between banks and technology companies for some time. Online fraud has risen dramatically over the past few years due to the acceleration in the use of digital platforms to pay others and purchase products online.
In June, the Financial Times reported that Labor had drafted proposals to force tech companies to compensate victims of fraud originating on their platforms. It is not clear 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 Ackroyd, a commercial litigation lawyer at Stewarts, told CNBC that after winning a reduction in the cap on APP fraud reimbursements to £85,000, banks “will receive another boost if their efforts to push the government to place some regulatory responsibilities on banks are successful.” “. Technology companies are also successful.”
However, he added: “The question of what regulatory regime can cover those companies that do not play an active role in PSR payment systems, and how, is a complex issue which means this issue is unlikely to be resolved any time soon.” “.
More broadly, banks and regulators have long been pressing social media companies to collaborate more with UK retail banks to help combat the fast-growing and ever-evolving fraud threat. The main request was for technology companies to share more detailed intelligence about how criminals are misusing their platforms.
At a UK financial industry event focused on economic fraud in March 2023, regulators and law enforcement stressed the need for social media companies to do more.
“Today we're hearing from all the companies we've spoken to that a significant proportion of this fraud is stemming from social media platforms,” Kate Fitzgerald, head of policy at PSR, told event attendees.
She added that there was a need for “absolute transparency” about where fraud occurred so that regulators could know where to focus their efforts in the value chain.
Social media companies were not doing enough to combat and remove attempts to defraud Internet users, another complaint from regulatory authorities at the event.
“What is missing is social media companies at scale removing suspicious accounts involved in fraud,” Rob Jones, director general of the National Economic Crime Centre, a unit of the UK's National Crime Agency, said at the event.
Jones added that it was difficult to “break the ice” at tech companies “to get them to go for it.”
Tech companies push for 'cross-industry collaboration'
Meta has pushed back on suggestions that it should be held liable to pay compensation to victims of APP fraud.
In written evidence to a parliamentary committee last year, the social media giant said UK banks were “too focused on their efforts to shift responsibility for fraud to other industries”, adding that this “creates a hostile environment that is in everyone’s interests”. From scammers.”
The company said it can use direct intelligence from major banks through the Fraud Information Exchange (FIRE) initiative to help stop fraud and develop and improve machine learning and AI detection systems. Meta called on the government to “encourage more collaboration between industries like this.”
In a statement to CNBC on Thursday, the tech giant stressed that banks, including Revolut, should look to join forces with Meta in its FIRE framework to facilitate data sharing between the company and senior lenders.
A Meta spokesperson said last week that FIRE is “designed to enable banks to share information so we can work together to protect the people who use our services.” “Fraud is a cross-sector issue that can only be addressed by working collaboratively.”
