Russia passes law requiring banks to reimburse retail customers for stolen funds

MOSCOW. July 12 (Interfax) - The State Duma has passed a bill in the second reading and overall that requires banks to reimburse retail customers within 30 days for stolen funds if they were transferred without the customer's consent.

The bill (No. 197920-8), authored by Duma Financial Market Committee Chairman Anatoly Aksakov, was submitted to parliament in the fall of 2022.

Under the passed bill, the money transfer operator will be required to reimburse the amount of any transaction made without the voluntary consent of a retail customer within 30 days of receiving a request from the customer for reimbursement of such a transaction or within 60 days in the case of a cross-border money transfer if it cannot prove that the customer violated procedures for the use of electronic means of payment and that this led to the transaction being made without the customer's consent. The amount must be reimbursed in full.

In order to improve existing anti-fraud mechanisms, it is proposed that not only the bank of the payer be required to check transactions for signs of fraud, as is now the case, but also the bank of the recipient, including checking against a database on cases of and attempts to carry out transfers without customers' consent that is maintained by the Central Bank, a memo attached to the bill said.

In addition, it is proposed to grant banks the right to refuse to carry out instructions for clearly fraudulent transactions for two days, even if the customer grants consent. "Money is most often stolen from individuals through methods of social engineering, where the person themselves transfers money to the fraudster. As a rule, within two days the customer realizes that the money is being transferred to a fraudster," the memo said.

The anti-fraud system is a set of measures to assess bank transactions for the likelihood of fraud. The system applies certain criteria to every transaction and if it does not comply it checks the transaction more carefully and flags it.

In the bill's first reading, it was proposed that the law go into effect on the day of its official publication, but for the second reading this was amended so it will go into effect a year after its publication.