CashNews.co
Chances are you’ve been targeted by an online scammer.
Perhaps you’ve received a phishing e-mail from a purported Nigerian prince promising a big payout from his frozen account in exchange for a small fee and your banking information. Or maybe it was a text message urging you to click on a link because your debit card has been frozen or to accept a surprise e-transfer.
It seems fake fortune is smiling upon me, too. I recently received an e-mail alerting me to a deposit of $1,200 in my non-existent casino account and another offering me a lucrative investment opportunity.
“We are prepared to act as a silent partner, offering financial support while fully respecting your autonomy in managing the business,” stated one e-mail. “Whether through an equity arrangement, joint venture, or loan, we are flexible in structuring the partnership to best suit your needs.”
When it comes to financial fraud, we ain’t seen nothing yet. Open banking and a new real-time payments network are coming to Canada, and they will provide criminals with new vectors for exploitation. That’s why the banking industry is urging the federal government to combat financial fraud by implementing an anti-scam action plan that takes a multi-industry approach.
“This is a shared responsibility,” the Canadian Bankers Association wrote in a recent submission to the House of Commons standing committee on finance. “Canadians, government, financial institutions, telecommunication companies, online platforms, technology companies, law enforcement, and the courts all have a significant role to play in this fight.”
Sure, the CBA’s recommendation is rooted in self-interest. But so what? The idea makes sense given what has already transpired in other countries.
“Australia’s experience, for example, saw significant increases in scams following the launch of real time payments and consumer-driven banking, highlighting the need for proactive measures to mitigate these risks,” the CBA stated in its submission.
Canadian fraud statistics are already staggering.
Last year, there were 41,988 victims of fraud in Canada with total losses estimated at $569-million, according to the Canadian Anti-Fraud Centre. There have already been nearly 16,000 victims of fraud and $284-million in losses during the first half of 2024.
But that’s likely the tip of the iceberg. The RCMP estimates that only 5 per cent to 10 per cent of frauds are reported by victims. As such, the CBA reasons that true losses could be as high as $11-billion annually.
The Department of Finance, which is consulting on various proposals to strengthen the financial sector, acknowledges that “everyone has a role to play in stopping fraud.” But proposals outlined in its consultation paper are largely focused on banks.
Ottawa is mulling whether banks should be required to “prevent or delay transactions” that are suspected to be fraudulent and whether consumers should have the option of disabling the ability to conduct higher-risk transactions, such as wire transfers, on mobile apps or through online banking.
Sure, such changes ought to be examined. But the government must also think laterally because financial scams often involve other companies including tech platforms, wireless carriers and residential internet service providers.
Imagine what more could be accomplished if wireless carriers systematically alerted banks about phone numbers associated with known fraudsters?
Just think of all the text messages that consumers delete and voluntarily report as junk. Surely, that data could be put to better use.
To its credit, the government is examining how to increase transparency and accountability for financial fraud.
Canadians already benefit from some liability protections for unauthorized credit card and debit card transactions. But as the consultation document notes: “Bad actors continue to find new ways to perpetrate fraud to gain both unauthorized and authorized access to Canadians’ money.”
The government must think broadly about liability. Shouldn’t tech companies, for instance, bear some of the responsibility for failing to protect consumers from financial frauds perpetrated over social-media networks, especially since some are also dabbling in peer-to-peer payments?
At least one banking chief executive argues they should.
“The majority of fraud starts online, specifically on social media, and it is high time that tech firms step up to protect people using their sites,” wrote Robin Bulloch, CEO of Britain-based TSB, in an op-ed for The Independent earlier this year.
Ottawa is also considering introducing a maximum liability threshold for account holders who are victims of unauthorized transactions. But the idea is already proving controversial elsewhere.
British regulators, for one, walked back plans to force banks and other payment companies to refund fraud victims up to £415,000 ($738,000), The Financial Times reported this week. The maximum payout will likely be cut to £85,000, the newspaper reported, citing people familiar with matter. In addition to pushback from banks and fintechs, the story cited concerns that fraudsters would game the compensation system.
Canada must learn from the experiences of Australia and Britain. By all means, hold banks to account. But don’t let other companies off the hook.