Korea forces banks to repay fraud victims

The South Korean government is to force financial companies to compensate victims of online identity theft.

The country's Ministry of Finance and Economy (MoFE) is bringing in legislation that will make it compulsory for banks to cover any losses people incur from account hacking and fraud, the Korea Times reports.

Under the scheme, which comes into effect in September 2006, banks would have to provide compensation even if they are not directly responsible for damage to customer accounts.

The move follows a refusal by Korea Exchange Bank to compensate customers who were defrauded by internet banking. The bank said it would not compensate for customer damage unless people could prove the bank was at fault.

But the Korean government people who are careless with PINs and passwords would not be compensated for losses or damages from online scams under the new law.

UK banks are not required by law to provide compensation for fraud, although many do.

Richard Starnes, president of the Information Systems Security Association UK, said: "Out of customer relations, the banks repatriate funds for customer relations. I don't see any need for the legislation here at this point because banks look after their customers by repatriating funds."