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Legislative Council - Fifty-Fifth Parliament, First Session (55-1)
2023-11-01 Daily Xml
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Banking Scams

The Hon. T.T. NGO (15:35): I rise to speak about an increase in banking scams. The Consumer Action Law Centre based in Victoria reported earlier this year that between 2019 and 2022 scam losses via bank transfer reported in Australia had increased by a staggering 200 per cent. They have been identified as the most common payment method for scams. Time is crucial to recovering bank transfer scams, but by the time action is taken the money has often been withdrawn, sent overseas, or converted to cryptocurrency.

The reality is, we live in a digital environment that is constantly changing and so, too, are the ways in which scams and identity theft are occurring. At the moment, individuals can receive messages from scammers that look or sound similar to ones they are used to receiving from their bank and companies they have been dealing with for many years. Banks need to reassess how they communicate with their customers so that legitimate communications are not confused with scams.

According to the Australian Securities and Investments Commission (ASIC) report released in May 2023, about 31,100 customers across the four big banks—ANZ, Commonwealth Bank, NAB and Westpac—collectively lost more than $558 million. The banks only paid around $21 million in compensation and the rate of reimbursement was most often very low, ranging from 2 to 5 per cent.

Last year, I was approached by a South Australian who had lost more than $300,000 when transferring funds to the trust account of his conveyancer, only to find out later that the funds had somehow been redirected to another bank account. Australian Financial Complaints Authority (AFCA) is currently investigating this particular case as the bank involved refused to reimburse their customer. This individual, like us all, has grown accustomed to online banking. Many banks in our local communities have closed their doors and gone, which means that managing our banking needs online is often the only option.

The Consumer Action Law Centre CEO, Stephanie Tonkin, said putting banks on the hook for compensation would encourage them to invest more in preventing scams occurring in the first place. However, media reports state that Australian banks are arguing that requirements to bear the costs of internet fraud could create complacency among consumers and lead to even more losses.

The Age and The Sydney Morning Herald obtained internal documents under FOI in which ASIC stated that there was 'strong opposition' from the banks about requests for banks to do more to prevent scams and to improve their reimbursement processes. Such banking reform has been happening in the UK for years. Back in May 2019, a new code of practice called the Contingent Reimbursement Model (CRM) was introduced for the finance sector.

The CRM code is designed to give bank customers fairer and more consistent redress. Next year, the CRM code of practice will become a mandatory requirement for the UK's banking sector. This means that banks in the UK will be liable to reimburse victims of scammers who impersonate financial institutions or the police. The reimbursement costs will be split between the bank sending the funds and the bank receiving the funds.

The UK has seen the need to legislate these changes so that all banks are incentivised to respond more diligently to scams. The fact is that many scams happen through our banking services; this is the reason our state and federal governments must continue urging all banks to invest in improved cybersecurity measures. The best way to achieve this outcome is by mandating it through legislation.

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