Costa Rica | New Substitute Text for the Bill: “Protection of Consumers Regarding the Custody of Funds Managed by Any Authorized Public or Private Financial Institution in Costa Rica.” FILE N.º 23908

Published on Nov 29, 2024

Arianne Silva, associate in Costa Rica expert in Banking and Finance, shares the following article: This bill arises as a response to the growth in complaints of digital banking frauds. This bill aims to establish the parameters of liability and procedures for public or private financial institutions and customers in the event of electronic fraud.

On October 29, 2024, the Legal Affairs Committee approved a substitute text for the bill that will be analyzed in the next regular session period. The substitute text considers the comments of several groups such as the Costa Rican Banking Association, the Ombudsman's Office, "Movimiento Gente Estafada” in Costa Rican Banks, the Judicial Branch - Public Ministry Cybercrime Unit, the Supreme Court of Justice, the Chamber of Banks and Financial Institutions of Costa Rica, the Ministry of Economy, Industry and Commerce, the Office of the Financial Consumer, among others.

The bill was created as a result of the growth in complaints of digital banking frauds, which from 2021 to 2022 grew by 43.6%, from 5,528 cases to 7,938.1 The economic damage caused by this criminal activity in 2023 was ¢19,827 million, while in dollars, the frauds amounted to $2.2 million dollars2.

This bill also seeks to establish the parameters of responsibility and procedures to be followed in the event of electronic fraud for both clients and financial institutions.

This bill proposes to:

  • Establish a mechanism for the return of amounts withheld that are presumed to be the result of fraud, if there is sufficient evidence to conclude that the transaction was illegitimate.
  • Establish a maximum period for financial institutions to provide assistance, conduct an investigation, and issue a resolution when a person reports or informs them that they have been the victim of fraud.
  • Include the duty of financial entities to report to the General Superintendence of Financial Entities the accounts and their holders that have been determined to have been used to receive funds from electronic fraud.
  • Criminalize with a prison sentence of one to three years, the conduct of persons who attempt to forge a self-defraud to the detriment of the financial entity or participate in it.
  • Create mechanisms to prevent facilitated fraud or fraud committed through its payment platforms, as well as collaborate with entities of the Financial System in the prevention, investigation, and fight against this type of crime.
  • Urge the creation of regulations by the General Superintendency of Financial Entities so that financial institutions comply with the standards to prevent and mitigate the occurrence of digital banking frauds against financial users.
  • Require banking and financial institutions to maintain an emergency protocol, immediate attention, and knowledge of their employees, in case of theft of money from their clients.
  • Establish the responsibility of financial institutions that have custody of the consumer's savings or bank accounts, so that they respond, regardless of the existence of fault, for damages and losses caused by the theft of money, even if the damage is the result of an illegitimate third party who is not authorized by the account holder, regardless of the mechanism used for the theft.
  • Provide for the release of financial entities from liability only in the case of self-fraud or when the entity demonstrates that it complies with the appropriate cybersecurity standards established by the General Superintendence of Financial Entities.
  • Reversing the burden of proof in favor of the affected persons in cases related to consumer protection, the environment, personal digital banking fraud, or similar entities, both at the administrative and judicial level. The burden of proof will be borne by the financial entities.

Some of the criticisms of this bill from the affected sectors are:

  • It does not help prevent or reduce digital banking frauds
  • There are no economic limits on the liability of financial institutions.
  • There could be an increase in self-defraud, therefore, an increase in criminal complaints.
  • It could lead to a delay in the modernization of the financial system, as banks could decide to eliminate certain products that are available digitally to reduce liability risks.
  • If financial institutions assume responsibility for paying clients in the event of digital banking fraud, the person who committed the fraud would be left unpunished.
  • The payment that financial institutions must assume because of the liability that they will have could generate an imbalance in the banking activity due to the number of digital banking frauds that currently exist and that tend to grow.

Undoubtedly, this bill deals with a current core issue of which we must be attentive and informed about its process and outcome in the plenary.




The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

 

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