By Peter Martin
What if the government was doing everything it could to stop thieves making off with our money, except the one thing that could really work?
That’s how it looks when it comes to scams, which are attempts to trick us out of our funds, usually by getting us to hand over our identities or bank details or transfer funds.
Last year we lost an astonishing A$2.74 billion to scammers. That’s more than $5,200 per minute – and that’s only the scams we know about from the 601,000 Australians who made reports. Many more would have kept quiet.
If the theft of $5,200 per minute seems over the odds for a country Australia’s size, a comparison with the United Kingdom suggests you are right. In 2022, people in the UK lost £2,300 per minute, which is about A$4,400. The UK has two and a half times Australia’s population.
It’s as if international scammers, using SMS, phone calls, fake invoices and fake web addresses are targeting Australia, because in other places it’s harder.
If we want to cut Australians’ losses, it’s time to look at rules about to come into force in the UK.
Scams up 320% since 2020
The current federal government is doing a lot – almost everything it could. Within a year of taking office, it set up the National Anti-Scam Centre, which coordinates intelligence. Just this week, the centre reported that figure of $2.74 billion, which is down 13% on 2022, but up 50% on 2021 and 320% on 2020.
It’s planning “mandatory industry codes” for banks, telecommunication providers and digital platforms.
But the code it is proposing for banks, set out in a consultation paper late last year, is weak when compared to overseas.
Banks are the gatekeepers
Banks matter, because they are nearly always the means by which the money is transferred. Cryptocurrency is now much less used after the banks agreed to limit payments to high risk exchanges.
Here’s an example of the role played by banks. A woman the Consumer Action Law Centre is calling Amelia tried to sell a breast pump on Gumtree.
The buyer asked for her bank card number and a one-time PIN and used the code to whisk out $9,100, which was sent overseas. The bank wouldn’t help because she had provided the one-time PIN.
Here’s another. A woman the Competition and Consumer Commission is calling Niamh was contacted by someone using the National Australia Bank’s SMS ID. Niamh was told her account was compromised and talked through how to transfer $300,000 to a “secure” account.
After she had done it, the scammer told her it was a scam, laughed and said “we are in Brisbane, come find me”.
How bank rules protect scammers
And one more example. Former University of Melbourne academic Kim Sawyer (that’s his real name, he is prepared to go public) clicked on an ad for “St George Capital” displaying the dragon logo of St. George Bank.
He was called back by a man using the name of a real St. George employee, who persuaded him to transfer funds from accounts at the AMP, Citibank and Macquarie to accounts he was told would be in his and his wife’s name at Westpac, ANZ, the Commonwealth and Bendigo Banks.
They lost $2.5 million. Sawyer says none of the banks – those that sent the funds or those that received them – would help him. Some cited “privacy” reasons.
The Consumer Action Law Centre says the banks that transfer the scammed funds routinely tell their customers “it’s nothing to do with us, you transferred the money, we can’t help you”. The banks receiving the funds routinely say “you’re not our customer, we can’t help you”.
That’s here. Not in the UK.
UK bank customers get a better deal
In Australia in 2022, only 13% of attempted scam payments were stopped by banks before they took place. Once scammed, only 2% to 5% of losses (depending on the bank) were reimbursed or compensated.
In the UK, the top four banks pay out 49% to 73%.
And they are about to pay out much more. From October 2024, reimbursement will be compulsory. Where authorised fast payments are made “because of deception by fraudsters”, the banks will have to reimburse the lot.
Normally the bills will be split 50:50 between the bank transferring the funds and the bank receiving them. Unless there’s a need for further investigations, the payments must be made within five days.
The only exceptions are where the consumer seeking reimbursement has acted fraudulently or with gross negligence.
The idea behind the change – pushed through by the Conservative government now led by UK Prime Minister Rishi Sunak – is that if scams are the banks’ problem, if they are costing them millions at a time, they’ll stop them.
New Zealand is looking at doing the same thing, as is Singapore.
But here, the treasury’s discussion paper on its mandatory codes mentions reimbursement only once. That’s when it talks about what’s happening in the UK. Neither treasury nor the relevant federal minister is proposing it here.
Australia’s approach is softer
Assistant Treasurer Stephen Jones is in charge of Australia’s rules.
Asked why he wasn’t pushing for compulsory reimbursement here, Jones said on Monday prevention was better.
I think a simplistic approach of just saying, ‘Oh, well, if any loss, if anyone incurs a loss, then the bank always pay’, won’t work. It’ll just make Australia a honeypot for these international crime gangs, because they’ll say, well, ‘Let’s, you know, focus all of our activity on Australia because it’s a victimless crime if banks always pay’.
Telling banks to pay would certainly focus the minds of the banks, in the way they are about to be focused in the UK.
The Australian Banking Association hasn’t published its submission to the treasury review, but the Consumer Action Law Centre has.
It says if banks had to reimburse money lost, they’d have more of a reason to keep it safe.
In the UK, they are about to find out. If Jones is right, it might be about to become a honeypot for scammers. If he is wrong, his government will leave Australia even further behind when it comes to scams – leaving us thousands more dollars behind per day.
Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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