LCQ2: Measures to prevent fraudulent use of credit cards
3.5.2023

Following is a question by the Hon Shang Hailong and a written reply by the Acting Secretary for Financial Services and the Treasury, Mr Joseph Chan, in the Legislative Council today (May 3): Question: It has been reported that cases of fraudulent use of credit cards occur frequently in Hong Kong, and the number of relevant cases this year recorded an increase of 45.1 per cent as compared to that of the previous year. In this connection, will the Government inform this Council: (1) whether it will consider requesting the Hong Kong Association of Banks and the DTC Association to update the Code of Banking Practice, or amending the existing relevant legislation, so as to strengthen the monitoring of credit card issuers, thereby ensuring that such institutions adopt stringent security standards to protect the personal and financial information of credit card holders; (2) whether it will step up education for credit card holders by, for example, providing information and knowledge on credit card security (including how to activate two-factor authentication (e.g. using mobile phone short message service verification codes or fingerprint verification)) through channels such as websites and social media, so as to assist credit card holders in protecting their accounts and personal data; (3) whether it will study with the banking sector measures to encourage members of the public to apply innovative technologies, so that credit card holders can keep track of the activities of their credit card accounts at any time, and take immediate actions to notify the banks or cancel the accounts concerned in case of any abnormal transaction activities occurred in the accounts; and (4) whether it will strengthen co-operation with credit card issuers, banks and relevant information technology professional service contractors to jointly combat fraudulent use of credit cards and fraudulent activities, as well as strengthen data security, thereby enhancing the protection for credit card holders? Reply: President, In view of the increase of unauthorised credit card transactions and scams, we have been closely monitoring market developments, including technological changes as well as the latest modus operandi and trend of credit card frauds. The Hong Kong Monetary Authority (HKMA) maintains close liaison with the Hong Kong Association of Banks (HKAB), the banking industry and credit card associations, and reviews the existing circulars and authentication arrangements for credit card transactions from time to time, with a view to enhancing the security of credit card transactions and protecting bank customers. Regarding the various parts of the Hon Shang Hailong's question, my reply, in consultation with the HKMA, is as follows: (1) to (3) The HKMA issued to banks two new circulars on "Binding payment cards for contactless mobile payments" and "Principles for handling of unauthorised payment card transactions" respectively on April 25, 2023. According to the new circular on "Binding payment cards for contactless mobile payments", in addition to issuing an SMS one-time-password, banks are required to perform additional authentication for binding of credit cards to a new mobile payment app, so as to confirm that the customer has actually given such binding instructions. In addition, according to the new circular on "Principles for handling of unauthorised payment card transactions", banks should always treat customers fairly. When customers seek assistance from banks regarding credit card frauds, banks should adopt a pragmatic and empathetic approach to assist customers, and handle the cases based on the actual circumstances. The new circular also reiterates that banks must observe all relevant requirements and have proper internal systems and controls in place to manage the risks associated with credit card business, including the prevention of, detection of, and response to fraudulent transactions. The new circular requires that, if customers have already made reasonable endeavours to safeguard their credit cards and related information (e.g. authentication factors) and reported unauthorised credit card transactions to banks as soon as possible, banks when considering the losses arising from the cases should give full consideration to the effort reasonably made by the customers under the circumstances in avoiding the unauthorised transactions. Besides, banks should also take into account the actual circumstances and background of customers (e.g. customers of disadvantaged groups). The HKMA has set up a taskforce with the HKAB in early 2023 to explore measures to further strengthen the protection of credit card customers and how to handle credit card scams more efficiently. Given the evolving modus operandi of fraud cases, the HKMA and banks regularly update the promotional and educational programmes (e.g. exercising caution in verifying the authenticity of web pages and messages, and verifying the content of one-time-passwords (OTP) notification before entering the OTP for authentication) to remind the public to properly safe-keep and handle sensitive personal information and authentication factors when using online banking services to conduct transactions. In October 2022, the HKMA, together with HKAB and the banking and stored value facility sectors, supported the launch of an anti-fraud search engine "Scameter" by the Hong Kong Police Force (HKPF), which would enhance the prevention, detection and determent of frauds in the community and reduce financial losses of members of the public. To raise the vigilance of customers and member of the public against credit card frauds, we will continue to work with the industry and other stakeholders in further strengthening public education to enhance customers' ability to safeguard their credit card information and take precautions against credit card frauds. (4) Banks in Hong Kong have widely adopted technologies, including big data analytics and machine learning, to detect and monitor suspicious credit card transactions. They will contact or issue alerts to customers on suspicious transactions to facilitate customers' verification. We will continue to promote banks' adoption of technologies to enhance customer protection continuously. Besides, the HKMA has been working closely with the HKPF and the banking industry to proactively prevent and combat frauds and other financial crimes. The HKMA, the HKPF and major retail banks have formed the Fraud and Money Laundering Intelligence Taskforce to identify and report suspicious accounts through information sharing and data analytics. To further the collaborative efforts, the HKMA and the HKPF co-hosted a high-level sharing session with senior representatives from retail banks on April 21, 2023 to jointly explore innovative approaches to anti-deception and interception of illicit proceeds.