Electronic Financial Transactions Act Proposed to Strengthen Financial Companies' Liability for Financial Fraud Compensation

[Asia Economy Reporter Park Sun-mi] A bill to amend the Electronic Financial Transactions Act, which stipulates that financial companies are liable for damages when financial fraud occurs due to violations of personal information protection obligations, has been proposed in the National Assembly.

On the 28th, Jeon Jae-su, a member of the Democratic Party of Korea (representing Busan Buk·Gangseo-gu Gap and a member of the National Assembly's Political Affairs Committee), officially proposed the "Partial Amendment to the Electronic Financial Transactions Act" to strengthen relief for victims of electronic financial fraud such as smishing.

The current law holds financial companies or electronic financial service providers liable for damages when users suffer losses due to forgery or alteration of access media or accidents occurring in the technical domain. However, there is a problem that victims cannot receive compensation for smishing incidents caused by violations of personal information protection obligations.

Additionally, the law limits the notification to the Financial Services Commission and the Commission’s emergency response duties only to ‘infringement incidents’ such as disruption or paralysis of electronic financial infrastructure caused by electronic intrusion acts, making it difficult for the Financial Services Commission to intervene in cases that are not infringement incidents.

Accordingly, in this amendment, Rep. Jeon clarified that financial companies or electronic financial service providers are liable for damages even when accidents occur due to violations of personal information protection obligations.

Furthermore, the amendment shifts the burden of proof from the victim, resolving the issue where users found it difficult to prove whether the accident was subject to liability for damages due to the expertise and asymmetry of information and communication technology. It also includes large-scale or serious infringement incidents within the scope of infringement incidents, imposes related obligations on financial companies and electronic financial service providers, and requires the Financial Services Commission to investigate the causes of accidents and take corresponding measures, thereby strengthening victim protection.

Rep. Jeon emphasized the necessity of the system improvement, stating, “It is practically impossible for victims to prove damages in financial fraud using advanced information and communication technology,” and added, “Through the shift of the burden of proof and strengthening the responsibility of the Financial Services Commission, effective relief for victims is expected to be possible.”