As the government and the ruling party move to legislate a "no-fault compensation liability" scheme that would require financial firms to compensate victims when voice phishing losses occur even without negligence, banks are frowning. The burden is set to grow, from funding large compensation payouts to additional investment to build systems such as upgraded fraud detection systems (FDS).

The financial sector said on Thursday that the Democratic Party's voice phishing task force and a pan-government voice phishing task force held a meeting on Dec. 30 and decided to speed up related legislation.

At the meeting, the Democratic Party task force and the pan-government task force reviewed progress and results of the government's "comprehensive measures to eradicate voice phishing" announced on Aug. 28 last year. They were reported to have reached a shared understanding on introducing a no-fault compensation liability scheme for financial firms.

The ruling party and the government said the cumulative number of voice phishing cases by November this year was 21,588, up 15.6 percent from a year earlier. The amount of losses, at 1.133 trillion won, rose 56.1 percent.

Democratic Party lawmaker Cho In-cheol, secretary of the party's voice phishing task force, and ruling party lawmaker Kang Jun-hyun, secretary of the National Assembly's Political Affairs Committee, each recently introduced amendments to a related special law. The two bills were based on a shared view that the financial system should bear some responsibility for recovery as voice phishing losses have spread into a social risk that individuals find difficult to shoulder.

Kang's bill sets the maximum no-fault compensation limit at 50 million won. It requires the victim's account financial firm and the fraud-used account financial firm to split the compensation amount equally.

Cho's bill sets the compensation limit at 10 million won or more. It also includes requirements for financial firms to operate fraud detection systems (FDS) at all times and for the Financial Services Commission to assess how financial firms run their voice phishing response systems. If assessment results are insufficient, it allows the commission to demand submission of an improvement plan.

Critics say the introduction of the no-fault compensation liability scheme will inevitably add new cost burdens for banks. In addition to paying compensation for voice phishing losses, extra investment to prepare systems such as upgraded FDS will be unavoidable.

Financial regulators, on the other hand, see the scheme as raising preventive efforts by the financial sector and reducing the scale of damage over the long term.

The ruling party and the government also plan to pursue system improvements that would impose voice phishing prevention duties on virtual asset exchanges and enable refunds of stolen funds. The move reflects that virtual assets have recently been used as a major means of stealing funds in voice phishing crimes. They also decided to strengthen management of corporate accounts and foreigner accounts to eradicate mule accounts abused for crime.

At the meeting, Yoon Chang-ryeol, head of the pan-government voice phishing task force and director of the Office for Government Policy Coordination, said, "Based on the results of this ruling party-government TF consultation, we will swiftly overhaul subordinate regulations of related laws and supplement the Aug. 28 measures without gaps to respond more strongly to new fraud methods."

This trend aligns with financial authorities' stance of stressing consumer protection as the top priority. The financial sector is also making consumer protection a core value and moving to reorganise structures and overhaul related response systems.

In an organisational reshuffle at year-end, KB Financial Group moved its holding company's information protection division from the existing IT division to under the chief compliance officer and assigned an executive-level expert. It established a "cybersecurity centre" within the information protection organisation. KB Kookmin Bank created a new dedicated organisation under its consumer protection group to respond to financial fraud.

Shinhan Bank expanded the roles and functions of its consumer protection department. Hana Financial Group raised the rank of the head of its consumer protection group from managing director to deputy bank president, strengthening responsibility and authority.

Woori Bank introduced an AI-based smishing text message safety service. NH Nonghyup Bank reorganised its consumer protection support bureau into a financial fraud response bureau and expanded compliance monitoring staff.

A banking official said, "We sympathise with the direction of strengthening consumer protection through a no-fault compensation liability scheme for voice phishing, but there needs to be sufficient discussion on the cost burden and the scope of responsibility."