Landmark Court Ruling on ATM Fraud

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Until now, if someone managed to get your ATM information and clean out your Thai bank account, there was little you could do about it. The bank might tell you they're sorry it happened, and that's about all they would do. If you felt that your money should be restored by the bank, you first needed to give them a few minutes to have their little laugh before they made it clear that they would not be responsible. Now a landmark court ruling has changed things.

 

The following appears in the BANGKOK POST:

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Banks Tighten Screws on Fraud

 

Landmark Court Ruling on ATM Fraud Could Force Changes at Banks

 

DARANA CHUDASRI

 

Local bankers are reviewing their security procedures in light of a precedent-setting court ruling last week on ATM fraud.

 

The Sukhothai lower court last week ordered Siam City Bank to repay a 71-year-old customer 180,000 baht that had been withdrawn from an ATM in Songkhla.

 

The customer testified that he had not been in the southern province at the time of the withdrawals and that his ATM card remained in his possession. The court agreed that the theft was not the responsibility of the customer and directed the bank to repay the missing funds.

 

Members of the Thai Bankers' Association met last week to discuss the growing problem of electronic fraud and potential liability in light of the court ruling.

 

''The SCIB case is one that all banks are monitoring very closely. It's the first time that a bank has been ordered to repay a customer in this type of case,'' one banker said.

 

The customer acknowledged having shared his PIN code, the secret password used in electronic transactions, with his wife and children to allow access to ATM withdrawals from his account.

 

Bankers said that the fact that the customer revealed his PIN to a third party but was still found not liable for potential losses would have profound consequences for the industry.

 

''If revealing one's PIN to a third party is held to be acceptable, then many types of banking services, such as internet banking, could be affected,'' the banker said.

 

Pongsit Chaichutpornsuk, a senior vice-president and head of the fraud management division at Siam Commercial Bank (SCB), said he did not believe the case would necessarily create a new standard for the industry.

 

But financial institutions are undoubtedly faced with greater challenges related to electronic fraud.

 

Fraud can come in various forms, from computer hacking of internet accounts to credit card theft and ATM theft. One increasingly common method is for a thief to install a fake ''mask'' at an ATM to capture data from an ATM magnetic strip and record the PIN code. The thief can then fake the customer account data and use the captured PIN to withdraw funds.

 

Local banks have issued warnings to customers urging caution at ATMs to prevent eavesdropping and to ensure that a keypad or card reader is genuine. Most banks also impose restrictions on internet banking and phone banking accounts, with transfers permitted only to previously approved accounts verified in person at a branch.

 

''I think that the [sCIB] court decision will help push banks to work even harder to investigate unusual transactions and communicate with customers on safe use of ATMs,'' Mr Pongsit predicted.

 

He said that for SCB, losses incurred from ATM fraud were promptly repaid to the customer once an investigation is completed to ensure that the account holder had no complicity in the crime.

 

''Of course, there have been some cases where the bank has refused to refund the customer, as we found that the customer revealed a PIN to a close friend and that it was the friend who made the withdrawal,'' Mr Pongsit said.

 

In the SCIB case, the court noted that the customer promptly alerted the bank about his loss and co-operated fully in the bank's investigation, even to the point of revealing that he had shared his PIN code with his family members, even though this could have weakened his case for a refund.

 

The court said SCIB had failed to prove that the customer was culpable in the crime and thus ordered a full refund.