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The BSP Enforces EMV Card Fraud Liability Shift Framework

12.29.2016

In line with the policy decision to migrate the entire payment network to EMV technology by 1 January 2017, the Monetary Board, in its Resolution No. 2304 dated 23 December 2016, approved the EMV Card Fraud Liability Shift Framework (ECFLSF) which will take effect also on January 1, 2017  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.  

While substantial compliance has been achieved in updating softwares, upgrading ATM and POS terminals, and replacing credit cards, the replacement and distribution of debit and prepaid cards are still lagging behind because of sheer volume of outstanding cards.  In this regard, the ECFLSF sets forth the general principles in the allocation of liability and resolution of disputes on fraudulent transactions arising from counterfeit cards. 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.   This is considered fair and appropriate since the industry has been given more than three years to undertake full migration.

The issuance of the ECFLSF is expected to further accelerate EMV compliance efforts as well as speed up the dispute resolution and restitution process for customers who have valid claims arising from counterfeit fraud or skimming attacks.

Pending full migration to the EMV technology, the use of magnetic stripes in payment cards and/or card-accepting devices shall be allowed subject to the ECFLSF.  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 BSP advises cardholders to update their contact details and cooperate with their issuing banks for the replacement of their magnetic stripe cards with EMV chip-compliant cards.  Since the ECFLSF only covers counterfeit card fraud in “card-present” environment, cardholders should immediately report cases of lost or stolen cards to their issuer to prevent unauthorized charges.  For further inquiries and concerns, the banking public may also refer to the Frequently Asked Questions on EMV posted at the BSP website.

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