Consumer Bulletin: Understanding Fraud Protection

September 12, 2023

What you need to know

Financial fraud is rising – we all see reports of it every day in the news and our social media feeds, but it can be difficult to appreciate the risks and impacts of fraud when we have not had first-hand experience. It is important for everyone to understand how financial frauds take place and how to remain vigilant for ourselves and our loved ones. Opting out of financial services is not possible – these services are an essential part of managing our money and securing our financial future. Understanding how to participate in the system and protect ourselves is the key to avoiding becoming a victim.

Financial fraud is a crime that is increasingly common, and we may not always be as protected as we assume. This bulletin aims to provide you with information about what to look out for and the practical steps you can take to safeguard your finances.

Responsibility and fraud reimbursement

Fraudsters will do anything to steal money, and they often use electronic or wire transfers because these transfers can have significant value, are susceptible to impersonation and can be arranged without face-to-face meetings. Usually in these cases, as soon as the money is sent, the fraudster disappears, making it challenging to track or reverse the transaction.

Contrary to some people’s expectations, financial services firms do not automatically reimburse money when someone becomes a victim of fraud – either when a fraudster accessed their account or when they have sent money to a fraudster. Whether the firm should or will reimburse you for the fraud-related loss depends on how the fraud occurred. The firm will investigate and assess whether your actions played a role in the outcome and whether you have complied with the terms of your account agreement and acted reasonably.

You will not be considered responsible for your loss if:

You took all reasonable precautions to keep your password and personal information confidential, but someone still accessed your account and initiated a transaction you did not authorize.
You reported any loss of your cards or disclosures of personal information to the firm as soon as possible.

The firm's technology or security measures failed, leading to the fraud.
The firm had reason to suspect that you might be exposed to fraud but did not act.

If the losses arise from circumstances beyond your control and you complied with the terms of your account agreement and acted reasonably, financial firms will typically reimburse your losses.

Understanding account agreements

When you open an account and sign paperwork with a financial firm, you agree to certain terms of use. It is vital to read and comprehend these agreements to understand your rights and obligations. You are usually agreeing to be responsible for all account activities and transactions, and this usually applies even if they are fraudulent. Common scenarios where you might be held responsible include where you have:

Authorized the firm to transfer money from your account to someone else, only to realize later that you were scammed.
Unknowingly sent funds to a fraudster.
Shared your card or PIN (Personal Identification Number) with another person.
Not informed the firm immediately of the loss of your card or when your PIN has been compromised.
Not noticed money missing from your account in a reasonable time.

Generally, financial firms will not protect consumers from their own decisions no matter how unfortunate the outcome, even where they have been a victim of a fraud.

Staying informed and protected

Many firms have protocols in place to protect consumers, such as staff warnings, automated online alerts, and automatic detection of fraudulent spending patterns. It is crucial to take any warnings from your financial services firm seriously and to use the information provided to protect yourself. If you ignore the firm's attempts to safeguard you from fraud and proceed with a transaction that results in a loss, you are unlikely to be able to recover your funds later.

How consumers can protect themselves from financial fraud

To effectively protect yourself from financial fraud, it is crucial to be aware of the common pitfalls that fraudsters exploit and some essential steps that you can take to protect yourself and those you care about:

1. Be careful when clicking on links in texts and email

Fraudsters often send deceptive emails or messages impersonating legitimate institutions to trick you into revealing personal information or clicking on malicious links.

2. Strengthen your online security practices

Consumers often fall victim to fraud when they have used weak or easily guessable passwords or PINs, shared passwords among multiple accounts, or neglected to log out from public devices or networks. Create strong, unique passwords for each financial account and update them regularly. Avoid using easily guessable information, such as your name or birthdate.

3. Regularly check account statements and notifications

Consumers should regularly review account statements and transaction notifications to help them spot and report any unauthorized activities promptly.

4. Only use secure Wi-Fi connections

Consumer should avoid accessing financial accounts or conducting sensitive transactions on public Wi-Fi networks, as they may not be adequately secured, potentially exposing sensitive data and accounts.

5. Always verify the identity of people contacting you

Fraudsters may pretend to be representatives from financial institutions, government agencies or legitimate businesses, asking for personal information or money. Consumers should always be absolutely sure of the identity of the person they are dealing with before sharing any personal or financial information.

6. Safeguard your personal information

Never share sensitive information like passwords, PINs, or social insurance numbers via email or phone calls. Legitimate financial institutions will never ask for such details through these channels.

7. Enable two-factor authentication (2FA)

Whenever possible, enable 2FA for an additional layer of security. This usually involves receiving a one-time code via SMS or using an authenticator app to access your account.

8. Enable auto alerts

If your financial institution allows for financial alerts for withdrawals on your accounts and charges on your credit cards, enable these so that you can be aware of any unauthorized activity quickly.

9. Enable auto deposit for e-transfers

Enabling auto deposit means funds will be sent directly to your account and cannot be intercepted by fraudsters guessing passwords or hacking email.

10. Never return money to someone who has sent it to you

Fraudsters often appear to have sent money to a victim by e-transfer, wire transfer or cheque and later request a return of some or all of the money, claiming an error has been made. These are almost always fraudulent transfers and the money originally deposited will be reversed. If in doubt, contact your bank for advice.

11. Speak to your family and friends to help them be fraud aware

Financial frauds are sometimes obvious to everyone but the victim, and victims of financial fraud often feel alone and uncertain. Make sure that you have discussed financial fraud with the people that care about you and that the lines of communication are open if they have a question or doubt about a financial transaction or relationship.

Conclusion

Being aware of the potential risks and understanding your role in protecting yourself from financial fraud is essential in today's digital age. By implementing the suggested practices and staying informed about the latest threats, you can significantly reduce the likelihood of falling victim to fraudulent activities.