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Financial firms warn mandatory voice phishing compensation could backfire
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By Lee Kyung-min
The government and the ruling Democratic Party of Korea (DPK) are forcing financial firms to compensate voice phishing victims, regardless of who is at fault, fanning concerns over how far consumer protection should go without distorting incentives in the financial system, market watchers said Monday.
The move seeks to curb rapidly rising incidents of financial scams, but many say if banks are to bear the burdens exclusively, it could ultimately lead to more sophisticated scam tactics.
Behind the drive is a concern that voice phishing tactics are evolving too fast for individual customers alone to avoid falling victim to the scams. National Police Agency data showed losses from voice phishing exceeded 1.1 trillion won ($748 million) in the first 11 months of 2025, up more than 56 percent from a year earlier.
According to political circles, the ruling party's anti-voice phishing task force together with a pan-government task force is in the process of introducing legislation under the principle of “no-fault compensation.”
The bill will require banks to reimburse victims up to a certain amount. Cryptocurrency exchanges will be legally obligated to return funds lost to voice phishing scams.
A bill proposed by Rep. Kang Jun-hyeon of the DPK caps compensation at 50 million won per case, while another by DPK Rep. Cho In-cheul set the minimum at 10 million won.
The government and ruling party plan to iron out the two proposals and finalize details on compensation limits and follow-up procedures.
Financial firms, however, say that the policy could lead to more sophisticated tactics emerging.
“Victims being guaranteed reimbursement will lead to reduced consumer awareness of fraud overall, a boon for criminals to exploit the system through more sophisticated scams,” a financial group official said on condition of anonymity.
The bills exempt cases involving intentional wrongdoing or gross negligence, but this is not enough of a safeguard since banks lack investigative authority to determine whether a victim was at fault.
“The bill is understandably about holding banks more accountable in the context of consumer protection. But whether the move would lead to a desired outcome is quite doubtful since they don’t have the investigative or legal authority to determine the victims’ intention or gross negligence,” he said.
Banks also say the move instead would lead to tighter reviews of consumer requests for account openings and fund transfers, restricting overall financial access for ordinary consumers.
“The goal is to enhance consumer protection but the bill could undermine consumer convenience just as much. Whether shifting more responsibility onto financial entities would reduce fraud remains to be seen, with lingering concerns of barriers unintentionally being lowered for organized voice phishing rings.”