Issuers liability framework
THE policy-setting Monetary Board has approved a new framework that encourages banks to speed up the shift to the more secure EMV chip technology from the vulnerable magnetic stripe technology.
In line with the decision to migrate the country’s entire payment network to EMV technology by next year, the Monetary Board approved the EMV Card Fraud Liability Shift Framework (ECFLSF) which will take effect on January 1, 2017, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
The EMV or Europay Mastercard Visa is the global standard for chip-based credit and debit transactions that makes its difficult for fraudsters to hack into that than magnetic strip cards. The embedded chip contains unique transaction details that are activated each time the card is used. It is also protected by additional layers of security.
“Considering the complexity and magnitude of the EMV migration process for the entire banking industry, the ECFLSF takes into consideration that BSP-supervised financial institutions (BSFIs) would not be fully migrated by the set deadline,” the central bank said.
While substantial compliance has been achieved in updating software, upgrading automatic teller machines and point of sales terminals, and replacing ATM and credit cards, the replacement and distribution of debit and prepaid cards lag behind because of sheer volume.
Based on BSP estimates, the migration to EMV from magnetic stripe is 90 percent complete but about 76 million cards must be replaced.
“As a market-based enforcement mechanism, the ECFLSF operates in such a way that a BSFI that has adopted the secure EMV technology shall be protected from financial liability arising from losses on counterfeit card fraud. The liability for this type of fraud shall shift to the BSFI which is not or is only partially compliant with the EMV requirement,” the central bank said.
This is considered fair and appropriate since the industry has been given more than three years to undertake full migration.
The BSP issued Circular 808 in August 2013, setting out a more than three-year journey for banks and other financial institutions to make the complete shift towards EMV technology.
The ECFLSF is expected to accelerate compliance and speed up the dispute resolution and restitution process for customers who have valid claims as a result of counterfeit fraud or skimming attacks.
Until the banks attain full migration to the EMV technology, the use of magnetic stripes in payment cards and card-accepting devices will be allowed based on conditions set in the framework.
“Nonetheless, BSFIs are expected to achieve full EMV compliance as soon as possible or face monetary penalties and other sanctions pursuant to BSP Circular No. 875 dated 15 April 2015. For this purpose, BSFIs should get approval from the BSP for a specific timeline for completion of their respective EMV migration projects,” the central bank noted.
Cardholders must update their contact details and cooperate with their bank in replacing their magnetic stripe cards with EMV cards, the BSP said.
Since the framework only covers fraud, cardholders must report immediately cases of lost or stolen cards to prevent unauthorized charges, it added.