Banks Face Liability for Voice Phishing Compensation Amid Rising Fraud Cases

The South Korean government is advancing a no-fault compensation scheme requiring banks to reimburse victims of voice phishing scams unless they can prove customer negligence. This proposal, part of a broader legislative effort, aims to address a significant rise in telecommunications-based financial fraud, with losses reaching 433.8 billion won in 2025. The Financial Services Commission's plan shifts the burden of proof from victims to banks, compelling them to demonstrate that customers were negligent to avoid liability. Banks argue that this could lead to increased costs for consumers and warn of potential abuse of the system. The legislation is currently under discussion in the National Assembly, with a proposed compensation cap between 10 million won and 50 million won. Financial institutions are already enhancing anti-fraud measures, investing in AI systems to detect scams. The industry is concerned about the implications of the proposed changes on their financial responsibilities.

Key Points: • The South Korean government is proposing a no-fault compensation scheme for voice phishing victims. • Financial losses from voice phishing scams rose to 433.8 billion won in 2025, marking a 14.1% increase. • Banks must prove customer negligence to avoid liability under the new proposal, reversing the current burden of proof.