askST: Does deposit insurance scheme cover phishing scam victims?
Published on
25 Jan 2022
Published by
The Straits Times
SINGAPORE - The recent spate of phishing scams targeting bank customers has got some people asking why they are not covered when there is insurance for banks, citing the Deposit Insurance (DI) Scheme.
Others also asked if they can sue the banks to recover their losses.
The Straits Times spoke to lawyer K. Anparasan, a specialist in insurance and reinsurance claims and managing director of WhiteFern, for the answers.
Q: How does the DI Scheme work?
A: In 2006, the Monetary Authority of Singapore (MAS) announced that the Singapore Deposit Insurance Corp (SDIC) had been set up to administer the deposit insurance scheme, following the enactment of the Deposit Insurance Act in 2005.
The DI Scheme was set up to protect the core savings of small depositors in Singapore in the event a full bank or finance company fails. All full banks and finance companies in Singapore are members of the DI Scheme, except those exempted by the MAS.
Customers will be compensated up to a maximum of $75,000 in the event a DI Scheme member fails.
Q: Under what circumstances can a bank customer make a claim?
A: "Payment on the benefit of the DI Scheme is only made if a court order has been made to wind up a DI Scheme member, or the MAS has determined that a DI Scheme member is insolvent, unable or likely to become unable to meet its obligations, or about to suspend payments," said Mr Anparasan.
Q: Can a victim of a phishing scam who lost his savings with the bank make a claim under the DI Scheme?
A: The answer is "no".
"Customers of banks who have recently fallen victim to phishing scams are unlikely to be able to seek recourse from the DI Scheme because the scams do not appear to fall within the permitted use of funds under Section 30 of the Deposit Insurance Act 2005," said Mr Anparasan.
"The DI Scheme is designed to protect customers by insuring their deposits that are held with a full bank or financial company from situations where those entities fail. In simple terms, it operates like an insurance on bank deposits, in the event that a bank goes into liquidation and customers are unable to access their savings.
"Accordingly, the scheme will only be in effect when a DI Scheme member fails to meet a payment obligation. Indeed, if that happens, MAS will request the SDIC to intervene and pay out the amounts."
On the other hand, if the banks have an insurance policy that insures loss arising from such phishing scams, then the banks could potentially make a claim on that insurance policy, given that it is designed to underwrite those cyber risks, said Mr Anparasan.
Q: If a bank customer wants to sue the bank to recover his losses, how difficult will it be to prove that the bank's system has been compromised?
A: "It could be challenging for a bank customer to prove that his bank's system has been compromised because the customer does not have access to the banking system per se," said Mr Anparasan.
He added: "However, if the customer has identified unauthorised transactions, then he should immediately notify the bank. It would also be beneficial to collect evidence of the scam. This should include screen grabs of the phishing messages or websites and itemise the list of unauthorised transactions.
"Such unauthorised transactions are essentially an evidentiary exercise and could be difficult to prove, if the bank does not accept the customer's version of events.
"In that case, the customer has to engage a forensic expert or an expert in the domain of digital banking to ascertain if the bank has fallen short of the requisite standards and in ensuring its banking system is not compromised."
Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.
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