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Scams Surge

‘People are losing a fortune’, states the Australian Competition and Consumer Commission (ACCC), urging banks to act as scams surge.

Background – urge to stop the scams surge

The consumer watchdog is urging the major banks to adopt a pivotal measure to prevent scammers from cheating money out of unsuspecting victims after Australians lost a record $2 billion to fraudsters last year.

ACCC deputy chair Delia Rickard singled out banks’ reluctance to adopt safeguards that have been put in place in UK and Europe as a reason why scams continue to increase in this country. “People are losing a fortune, and we are calling on the banks to address it and introduce ‘Confirmation of Payee’,” she said, referring to a UK scheme that catches bank transfer scams by matching a recipient’s bank details with their name.

The criticism came following the release of an ACCC report confirming Australians lost $2 billion to scammers last year, more than double the $851 million lost in 2020.

A banks perspective

Last week, the Commonwealth Bank (CBA) called for an industry code of practice to include all services that grapple with scammers – including banks, telcos, crypto platforms and payment providers – to clarify their obligations regarding consumers.

However, the bank also announced that it would start using artificial intelligence to track customers’ behaviour, including things like mouse clicks and keystrokes, so that they can detect any unusual changes. It is also doubling the size of its scam prevention and protection team.

Confirmation of payee

The ACCC is pushing banks to implement an initiative similar to the UK’s ‘Confirmation of Payee’ scheme to reduce the volume of bank transfer scams.

Last year, the regulator said the schemes stole $227 million, also known as payment redirection scams. They are most damaging to businesses and are the second most financially damaging type of scam overall in 2021, after investment scams, which cost consumers $701 million.

Online banking transactions require the recipient’s name, BSB and account number.

“However, most banks only check the BSB and account number. They don’t have a red flag if there’s no match between the name and where the money’s going,” Rickard said.

In 2017, banks in the Netherlands introduced a name check service which reduced reported fraud by 81 %.

Banks’ resistance

However, Australia’s big four banks have not committed to introducing the measure. They have pointed instead to the New Payments Platform’s (NPP) PayID initiative, which banks argue already blocks those scams from happening. PayID works by linking someone’s bank account to an easy-to-remember piece of information like a mobile number or email address.

Spokespersons for Westpac and NAB said customers and businesses are encouraged to register and use PayID to ensure money goes to the intended recipient. A spokesperson for CBA said it was “considering several initiatives to help prevent scams and further protect our customers when making payments”, while ANZ declined to comment.

“Australian banks are working hard to protect customers against the growing threat of scams, and encouraging an increased use of PayID is an important part of this work,” said ABA chief Anna Bligh.

But Rickard said PayID’s low adoption rate is why further measures are required to protect consumers. In a recent speech, RBA head of payments policy Ellis Connolly said there are over 10 million registered PayIDs in Australia, but only 16 % of Osko payments go through PayID.

“We’ve been hearing about [the NPP] without seeing the vast majority move across to it,” Rickard said.

“So these scams are still happening, but technology is available to stop it.”

CBA throws support behind ecosystem-wide industry code

CBA’s executive general manager of everyday banking, Kate Crous, said last week that the bank prevented or recovered over $100 million in scams in 2021.

She said scamming has become “industrialised”, banks were just one part of the solution, and the government and broader community also needed to address the problem collectively.

The federal Labor government has promised to bring challenging new industry codes for banks, telecommunications providers, social media providers and government agencies to clearly define responsibilities for protecting consumers and businesses online.

Initial consultations have already started, and CBA’s general manager of group fraud management services, James Roberts, said he predicted these discussions would result in some code to govern the entire ecosystem.

“I do believe that banks need to do better and more. There’s no discussion around that point. I think it’s a collection of everyone needs to do better and more, from consumers educating themselves to banks lifting their game to telcos,” he said.

It’s like a balloon. If you squeeze on one side of the balloon, it bulges out to the other side. You need to squeeze simultaneously on all sides to make the problem smaller.

Crous added: “We’re not coming out today saying we are behind Labor’s manifesto. What we are saying is we support the principle of an ecosystem-wide approach to how we resolve scams. Because unless we come at this ecosystem approach, we’re not going to solve the problem.”

Vogue Advisory Group – keeping you up to date on financial scams

We are proactive in educating our clients about scams and acting when red flags appear to protect them from the grifters. If you need any advice regarding financial scams, please contact Vogue Advisory Group, and one of our financial advisors will assist you.