Standing Senate Committee on National Finance (NFFN) (May 28, 2024)
ISSUE: Fraud against financial consumers

Key points

FCAC expectations for unauthorized transactions

• FCAC recognizes the importance of addressing matters of fraud. Incidents of financial fraud have increased worldwide and can have a devastating impact on the individual.
• In support of its consumer education role, FCAC provides unbiased and fact-based information to help consumers understand how to protect themselves from financial fraud and scams.
• FCAC oversees the compliance of regulated entities with federal regulations as they relate to unauthorized transactions, in particular debit and credit card transactions. Generally, any banking or credit card transaction that a consumer didn't make or approve is an unauthorized transaction.
• FCAC's expectations with respect to investigations into allegations of unauthorized credit and debit card transactions are as follows:
  • FRFIs must weigh all relevant factors before finding the consumer liable, regardless of the method or technology used to process a credit or debit card transaction.
  • Specifically, FRFIs must conduct an investigation to determine whether circumstances beyond the cardholder's control (such as over-the-shoulder snooping, coercion, theft of the card, or system failure) resulted in an unauthorized transaction.
  • FRFIs may not rely solely on authentication technologies to discontinue or refuse to initiate an investigation into allegations of unauthorized transactions. For example, the consumer's liability cannot be based solely on the fact that the transaction was made using the correct chip and PIN.
• Consumers who have experienced banking-related fraud and are not satisfied with the resolution offered should also file a complaint with their bank.

Liability

• Liability for fraudulent transactions is a complex area, especially where fund transfers – including those where the source or destination is outside of Canada – are concerned.
• The problem of fraud is growing in size and magnitude, and we must ask ourselves if the safeguards we have are sufficient, and what more needs to be done.
• We must move beyond situations where one party can say “it’s not my fault or responsibility” while another party becomes a victim.

FCAC’s role in fighting fraud

• Aside from unauthorized transactions, FCAC’s role as a regulator is limited in many situations of fraud.
• However, through its Monthly Financial Well-being Monitor survey, FCAC conducts research into the incidence of fraud among a sample of financial consumers.
• Through its financial literacy efforts, FCAC also promotes consumer awareness in a range of areas, including fraud prevention.
• FCAC also influences and provides evidence-based input – supported by first-hand research – into policy frameworks for the evolving financial system by advocating for consistent protections and inclusion.
• Finally, FCAC works with industry, the Canadian Anti-Fraud Centre and other organizations to help mitigate fraud and protect consumers.