The Damage from Fraudsters is Proposed to be Shared. Who with and Do They Know About It? 0 7

In the context of the proposed directives and regulations on payment services, the Ministry of Finance supports the primary goal of regulation – enhancing consumer protection by establishing stricter requirements for participants in the payment services market.

One of the key steps in developing new rules is to extend responsibility to all participants in the payment chain – payment service providers, including banks, technology companies, and various platforms involved in the payment process. The Ministry pays special attention to the involvement of telecommunications companies in reducing fraudulent transactions, which allows for a more effective solution to the problem of both existing fraudulent transactions or their attempts, as well as reducing their likelihood.

Considering that consumers are less protected in payment service transactions and may lack sufficient financial literacy, broader participation from market participants is very valuable and important to effectively prevent fraudulent transactions.

Last year, clients of the four largest commercial banks in Latvia lost 15.5 million euros to theft, while 12.2 million euros in fraud attempts were prevented, according to data from the Financial Industry Association. The volume of prevented fraud cases has significantly increased; for example, in 2021, damage of 3.3 million euros was prevented, while the amount obtained by fraudsters was 11.1 million euros. In the first three quarters of this year, fraud attempts amounting to 9.6 million euros were prevented, while the damage amounted to 9 million euros, indicating a qualitative change in trends. However, the amounts involved remain substantial.

In the proposed regulatory acts for discussion, it is advisable to implement a number of innovations aimed at enhancing payment security and protecting consumers: for example, verifying account ownership to the corresponding person – this mechanism is already partially implemented; the obligation for banks (payment service providers) to compensate for funds withdrawn as a result of fraudulent operations in certain cases; the possibility for banks to block payments when there are clear signs of fraud; active information exchange between banks for quicker identification of fraudsters and prevention of damage to clients; additional measures aimed at strengthening control over the payment chain and protecting participants.

Such innovations will help strengthen trust in the financial system and enhance user protection. At the same time, these proposals also provide for the client's responsibility for reckless actions, as well as the significant role of telecommunications operators as the first line of defense.