Should Banks Be Held Liable for Authorized Fraud?Aite-Novarica Group's Trace Fooshee on Policy, Strategy and Fraud-Fighting Tools
The United Kingdom and many other countries are considering ways to make banks liable for authorized payment fraud and lift the burden from millions of victims of online scams. Trace Fooshee, strategic adviser at Aite-Novarica Group, shares his views on why this might not be such a great idea.
"I totally understand why this rationale is so appealing, however, the problem of making sweeping policy changes is that it would effectively lay liability at particularly one party," Fooshee says.
While banks do reimburse customers for fraudulent transactions, they are not liable for compensating consumers for authorized payment fraud, in which victims are tricked into transferring the money.
"The shift in liability will very likely stimulate the market to ramp up innovation and scam controls," Fooshee says. "It is more than likely it will take more than a few years before we start seeing improvements in the market. During this period, I think banks will see a rise in friendly fraud and claim abuse. If consumers are relieved from being held accountable for poor security practices, they will stop being vigilant entirely. I think this will make them more vulnerable."
In this video interview with Information Security Media Group, Fooshee also discusses:
- Why online scams are on the rise;
- Technology tools banks can deploy to control authorized fraud;
- Why authentication tools cannot address this type of fraud.
Fooshee, a senior analyst at Aite-Novarica Group, previously led fraud strategy at SunTrust and was a senior manager at Deloitte's transaction and business analytics unit.