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California has increased its oversight with the expansion of the Department of Financial Protection and Innovation, while Massachusetts has incorporated Reg-E into state law.2 These state initiatives reflect a continued effort to protect customers given the more focused CFPB oversight role and to mirror similar measures abroad. In the United Kingdom, financial institutions are required to reimburse victims up to £85,000 within five days of reporting authorized push payment fraud, and partial scam reimbursement models have been established in the European Union and Asia.3,4 In light of these global trends toward institutional scam reimbursement and the change in the US, financial institutions have begun expanding their fraud reimbursement policies to showcase their commitment to customer protection.5 Ernst & Young LLP (EY) urges financial institutions to continue to enhance preventive and detective measures to reduce reputational, financial and legal risks.
Part 3 of our scams series highlighted how a strong commitment to customer education serves as an essential preventive measure helping reduce customer losses, and how helping customers avoid scam losses ultimately minimizes reimbursement liability. Other preventive controls, such as enhanced authentication, strengthens security by limiting account access, while maintaining a fraud hotline streamlines the reporting process when customers encounter scammers. Financial institutions can conduct routine control assessments to detect areas of potential vulnerability and address concerns promptly. By maintaining a strong preventive control framework, institutions can reduce the fraud impacting their customers, limiting the risk of liability.