Financial institutions to be held responsible for fraud in mobile banking

PTA, SBP will be final authorities to be approached by parties in dispute

KARACHI: The authorised financial institutions (AFIs) would be held responsible for any financial loss and fraudulent activities in mobile banking, said the Pakistan Telecommunication Authority (PTA) on Monday.

“AFI(s) shall be liable to their customers for any financial loss, fraudulent activities and its consequences thereof in accordance with the applicable laws,” the regulator said in the “Regulations for Technical Implementation of Mobile Banking, 2016.”



Third-party service providers and telecom operators will maintain detailed technical transaction logs to enable processing of audit trails required to be reconstructed in the event of any disputes or supervisory concerns of the PTA and the State Bank of Pakistan (SBP), without compromising the confidentiality, it said.

The regulations were framed with the objective of enabling error-free interoperability to speed up financial inclusion of unbanked people. Keeping in view the fast-paced penetration of mobile internet in the country, the SBP has set a target of opening 30,000 mobile accounts by 2020 against 13,000 at present.

The regulator has designed a mechanism to resolve expected disputes. The PTA itself and the SBP would be the final authorities to be approached by the parties in dispute, including AFIs, mobile phone operators and third-party service providers.



Although the telecom regulator did not give a timeline to resolve the expected disputes, it said the parties should report the issue to the regulators in 28 working days.

“The PTA and the SBP may constitute a joint committee to resolve the dispute. The decision taken by the committee shall be final and the same shall be abided by the parties in dispute,” the regulations stated. All telecom operators and third-party service providers will put in place an effective, comprehensive and efficient consumer complaint handling mechanism to safeguard the consumers against risks of fraud, loss of privacy and delays in service provisioning among others, the regulations stated.

In the regulations, the PTA made special laws to regulate third-party service providers. The telecom authority said the third-party service providers (TPSPs) would be licensed by the PTA and authorised by the SBP to provide technical services for channelling, routing and switching transactions for branchless/mobile banking only.

“TPSPs shall be for interoperability purpose within branchless banking domain, where payment system operators and payment service providers shall provide an electronic platform for clearing, processing, routing and switching of electronic transaction…,” it stated.



TPSPs are subject to an initial capital requirement and an ongoing requirement of minimum paid-up capital (free of losses) of Rs200 million. They will maintain at all times at least 10% of the required capital or any other amount prescribed by the central bank from time to time, as security deposit at the SBP-BSC office, it said.

Published in The Express Tribune, May 17^th, 2016.

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