Bank deposit safety in Japan is threatened increasingly by people using forged or stolen cards to make illegal withdrawals. Now, members of the Diet are preparing to introduce a bill that would require all financial institutions — including commercial banks, post offices and credit unions — to compensate victims for losses from these latter-day financial crimes.
This is certainly good news for depositors. But not all victims would be assured of 100 percent compensation. The method of compensation would vary according to whether the card used to make the illegal withdrawal was forged or stolen. In either case, though, the entire loss would be refunded unless it was a result of the victim’s negligence or fault.
For example, money withdrawn with a forged card would not be refunded if the victim was ascertained to be at serious fault. The question is what constitutes “serious fault.” A reasonable definition should be established during the debate on the bill.
Loss from card theft would be refunded in varying degrees, depending to what extent the victim was at fault. If the depositor was not at fault, the loss would be refunded completely. If he or she was at least partially to blame, 75 percent of the loss would be reimbursed. But if the the victim was considered at “serious fault,” not a single yen would be returned.
Initial responses from the banking community were largely negative, with most institutions strongly resisting the idea of compensation. In a compromise move, the Financial Services Agency offered a plan to split losses equally between the financial institution and depositor. The plan fell through amid growing public anxiety about the safety of automated teller machines (ATM), as illustrated by a class-action suit filed against banks by card-crime victims.
Public concerns about card crime heightened in January when a group of card forgers was arrested for withdrawing large amounts of money from ATMs. According to investigators, the forgers, including a golf club manager, stole cash cards from golfers’ lockers and obtained their identity data by skimming the card’s magnetic strip.
According to the Japanese Bankers Association, a total of 968 million yen in deposits was illegally withdrawn with forged ATM cards in fiscal 2004, up from 290 million yen in fiscal 2003. The number of cases in which such withdrawals were made soared from 100 to 411.
Online card crime has also increased rapidly. A notable example is a sophisticated technique known as “fishing,” in which a cyber-con artist posing as an Internet company sets up a fake Web site to steal passwords and other personal information from unsuspecting users. Earlier this month, police arrested a man who had created a site similar to the Yahoo auction site.
Financial institutions, though, seem concerned more about card thefts than card forgeries. That’s because full compensation for a loss attributed to a depositor’s fault — such as leaving the card somewhere where it could easily be stolen or using a password that could easily be detected — could make depositors less aware of the need for self-protection or could even encourage moves to swindle banks out of compensation money through false reports of damage.
It is time for financial institutions to take more positive steps to ensure deposit safety. If they sit on the sidelines, depositors will feel even more unsafe. Indeed, depositors may well stop using ATMs or withdraw their money altogether unless their safety concerns are addressed more effectively.
Encouragingly, major banks are already moving in this direction. They have put out a commercial saying that deposits will be protected by an integrated-circuit (IC) card that identifies the depositor by his or her biometric data showing the palm’s vein pattern. The campaign, designed to secure customers by emphasizing the safety of the ATM, indicates that keeping passwords secret is not enough to avoid theft or forgery.
According to a survey, 80 percent of the 112 regional banks throughout the country were considering measures to improve their ATM systems, including introducing IC cards. It appears that a new era of deposit safety is opening, with depositors choosing banks by the safety of their ATMs.
At the same time, depositors themselves should become more safety-conscious. Passage of the bill will surely improve the safety of ATM systems, although card crime may continue, albeit on a limited scale, as would-be swindlers devise new kinds of techniques. A new age of card security is an age of increased depositor responsibility.
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