Social media is the source of 80 per cent of what is called approved payment fraud, the deputy governor of the Central Bank told an Oireachtas committee on Wednesday.
The Central Bank is seeing an increase of authorised payment fraud, with scammers using social media and online platforms, Colm Kincaid told the Oireachtas Joint Committee on Finance on Wednesday.
“What we are seeing increasingly is authorised payment fraud where fraudsters use social media and other tools to manipulate [the consumer],” he said. “That fraud is taking place, 80 per cent plus of the time, on social media and online platforms,” Mr Kincaid said, with the transactions then executed through the financial systems.
The committee heard that the digitalisation of the financial system has brought many benefits to consumers, but that it has also brought new opportunities for criminals to exploit.
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“We would see non-digital banks with the same levels of fraud as with the digital banks,” Mr Kincaid said and noted trends across the sector are “broadly similar”.
He said an improvement of controls over the financial system had led to unauthorised payment fraud becoming “less prominent”, with fraudsters turning their attention to social media as a route to victims.
Earlier this year, the Central Bank was granted Trusted Flagger status under the Digital Services Act to notify online platforms of illegal content which must be removed.
Its representatives said the financial body had reported 150 instances of illegal content to digital platforms under this process, with a further 110 reports made of harmful content in relation to scams.
Brian Hayes, the chief executive of the Banking and Payments Federation Ireland (BPFI), said the evolution of technology across the neo and traditional banks had led to “new challenges”, including the increasing complexity and sophistication of fraud.
He said there had been a shift, from fraudsters seeking to compromise banking systems to targeting the users through manipulation, deceit and impersonation of legitimate players in the space.
Niamh Davenport, the head of financial crime for BPFI, said there was a link between fraud and money laundering in Ireland, with fraudsters often acting as one arm of criminal enterprises with fraud being used to fund human trafficking among other crimes.
Oireachtas members raised concerns about the level of customer service provided by popular digital banking platforms.
Deputy Pearse Doherty described the customer service provided by Revolut as “appalling”, stressing that it was his view that it was foolish to leave money in the online bank in light of this.
The Central Bank representatives said they had not seen a significant difference in complaints from company to company within the banking sector, though Mr Kincaid would not comment on specific companies.
He noted that the financial sector had been “very responsive” to concerns expressed by the Central Bank and that the regulator had intervened to require that banks which only made chatbots available to also provide human agents.
Mr Kincaid noted that digital banks which provide 24-hour convenient banking must equally deliver 24-hour convenient customer support.
The committee heard level of retail payments going through neobanks is “on a par” with the Irish banks, but that deposits are lower. Despite that, the amounts held by these online banks would be in the billions, according to Yvonne Madden, head of domestic banks and retail credit at the Central Bank.
Queried on the safety of Irish deposits in digital banks based outside of Ireland by TDs and Senators, Central Bank representatives repeated their trust in European banking regulations which also govern Irish institutions.
Four of the main digital challenger banks operating in Ireland did not send representatives to the committee despite being invited to do so.
Revolut, Bunq, N26 and Monzo were invited to discuss the regulatory oversight of the so-called neobanks. It understood that Revolut and Monzo said they would be able to attend at a later date, but that the committee did not receive responses from the other banks.
