IRELAND Law and Practice Contributed by: Niall Esler, Shane Martin, Laura Whitson and Coleen Wegmann, Walkers
card fraud, identity fraud and scam-related activity. Many firms have reported concerns relating to: • transactions and access or ownership of virtual asset wallets; • prominent use of fake identification documents or stolen KYC data; and • the involvement of shell companies and bank accounts opened by a third party. Given the increasing prevalence of fraud in the fin - tech space, it has been paramount to address fraud through regulation. PSD2 actively addressed account takeover fraud via Strong Customer Authentication (SCA), but steps are now being taken to update PSD2 to help stem the tide of the emerging types of fraud. 12.2 Areas of Regulatory Focus The Central Bank noted in its Regulatory Supervisory Outlook Report 2025 that, while digitally enhanced business models are providing many benefits for con - sumers and enhancing ease and speed of access to financial services, they are also leading to an increase in the risk of fraud and financial crime. The Central Bank sees fake comparison websites and fraud recov - ery schemes increasing in frequency and becoming more sophisticated. The Central Bank has noted a rise in AI being used to create realistic social media ads and profiles impersonating public or business figures (deepfakes). 12.3 Responsibility for Losses Under the MiFID Regulations, investment firms that safeguard client financial instruments and funds must introduce adequate organisational arrangements to minimise the risk of the loss or diminution of client assets, or of rights in connection with those assets, as a result of misuse of the assets, fraud, poor admin - istration, inadequate record-keeping or negligence.
Investment firms are required to participate in inves - tor compensation schemes. Such schemes compen - sate investors, for instance, if an investment firm goes bankrupt and is unable to return financial instruments belonging to an investor. PSD2 provides that, in the case of an unauthorised payment transaction, the payment service provider should immediately refund the amount of that transac - tion to the payer. However, in certain circumstances, the payment service provider should be able to con - duct an investigation, within a reasonable time, before refunding the payer. MiCAR provides that CASPs providing custody and administration of crypto-assets on behalf of clients shall be liable to their clients for the loss of any crypto- assets or of the means of access to the crypto-assets as a result of an incident that is attributable to them. The liability of the CASP shall be capped at the market value of the crypto-asset that was lost, at the time the loss occurred. In contrast to the rules under the MiFID Regulations for investment services, crypto-assets will not be covered by an investor compensation scheme. Regulated financial service providers may also be subject to fines and compensation requests for con - traventions of financial services legislation as part of the administrative sanction procedure or pursuant to a private right of action for damages by customers who suffered loss or damage as a result of such con - traventions.
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