Banks respond to ASIC’s findings on scam losses
The Australian Banking Association (ABA) has announced that its members will implement a new industry-wide standard to block transfers to suspect accounts and improve scam victims’ experiences with their banks. This comes after a report by the Australian Securities and Investments Commission (ASIC) revealed that the big four banks only compensated a tiny fraction of customers who lost money to scams in the 2021-2022 financial year.
According to the report, about 31,100 customers at Westpac, NAB, Commonwealth and ANZ collectively lost more than $558 million to scams in that 12-month period. The banks only paid about $21 million in compensation to the victims and the rate of reimbursement was very low, ranging between 2 and 5 per cent.
The report also found that policies for dealing with scam losses varied greatly across the big four banks, and called for universal measures to be put in place. ASIC deputy chair Sarah Court said that banks “can and should do more” to protect customers from scams and that they need to adopt a “holistic and comprehensive” approach.
Scams on the rise in Australia
Scams are a growing problem in Australia, with Australians losing a record $3.1 billion to scams last year, up 70% since 2020. Experts warn that anyone could become a victim as the cons grow increasingly sophisticated and target digital channels such as mobile banking, mobile payment apps, ACH payments and online loan applications.
Some of the most common types of bank frauds include account takeover, phishing, credential stuffing, social engineering and cybersecurity issues. Fraudsters use various techniques to obtain account credentials, personal information and money from unsuspecting customers, often by impersonating legitimate entities or exploiting vulnerabilities in software and systems.
The ABA said that it was working closely with ASIC, the Australian Financial Complaints Authority (AFCA) and other stakeholders to develop the new standard, which will be implemented by June 2024. The standard will include:
- A consistent definition of scam losses and a clear process for identifying and reporting them
- A set of criteria for determining when customers are eligible for compensation and how much they should receive
- A framework for blocking transfers to high-risk accounts and sharing intelligence on scam trends and patterns
- A commitment to providing timely and empathetic support to scam victims and raising awareness of scam prevention
Consumer advocates welcome the move but call for more action
Consumer advocates have welcomed the ABA’s announcement, but said that more action is needed to prevent scams and ensure fair outcomes for victims. They have called for banks to be subjected to mandatory compensation payments to victims, except in cases where the victim was negligent.
Consumer Action Law Centre CEO Stephanie Tonkin said that putting banks on the hook for compensation would encourage them to invest more in preventing scams from happening in the first place. She also said that banks have “billions of dollars in windfall profits” that they should use to fight the scam crisis.
Financial Counselling Australia CEO Fiona Guthrie said that scams are a “national emergency” and that banks have a moral obligation to help their customers who have been scammed. She said that banks should not blame customers for falling victim to scams, but rather acknowledge that they are often sophisticated and convincing.
She also urged customers to report scams to their banks as soon as possible and to seek free and independent advice from financial counsellors if they are in financial hardship.
