Australia's under-pressure banks have unveiled a new tool to combat fraudulent transactions in a bid to stop customers losing more and more money to sophisticated scams.
Bank transfers have been identified as the most common payment method for scams, but the banks say the "near real-time reporting" system will help them block the movement of money to fraudsters.
Time is crucial to recovering scam losses, but victims and law-enforcement agencies regularly report that delays by banks prevent them from retrieving stolen funds. By the time action is taken, the money has often been withdrawn, sent overseas or converted to cryptocurrency.
The Australian Banking Association (ABA) says the new digital platform, called the Fraud Reporting Exchange (FRX), represents a major development as it will streamline communication between the banks, allowing them to let each other know quickly if funds have been sent to a scammer.
"You might have had a phone call from somebody pretending to be a bank or the tax office or something, and you authorise a scam payment [and] off that money goes out of your account into an account at another bank," ABA chief executive officer Anna Bligh said.
"That takes time right now — or used to — for banks to contact each other to get all the details to potentially freeze the account that it's gone to, and that means that, unfortunately, those scammers have already taken it out and sent it overseas or to a crypto platform.
"This new initiative allows banks to contact each other in real time and put an immediate halt on the further transfer of money out of an account."
The ABA said 17 banks were on board or in the process of joining the new platform, following a 12-month pilot.
'Sorry, but it's on the customers'
The Consumer Action Law Centre says the banks' moving too slowly to share information is contributing to consumers losing money to scammers.
"We've been constantly receiving calls from customers who have been scammed, have been straight on the phone to their banks when they realise what's happened and already it's too late," CEO Stephanie Tonkin said.
"The answer we're hearing from our clients is the banks say, 'Sorry, but it's on the customers to protect themselves.'"
While The Consumer Action Law Centre welcomed the ABA initiative, Ms Tonkin said the onus was still on consumers to detect and report scams.
"It can't be incumbent on consumers to be the ones having to report the scam — what's needed is for the bank to invest in measures to prevent scams before they reach the consumer," Ms Tonkin said.
"A whole range of measures are needed — it's the slowing down of the payment system so that there can be checks whether the money's going to the correct account or not, whether mule accounts are being used, it's provisions in place to identify when there's a criminal activity occurring."
Very few victims get their money back
Last month, corporate watchdog ASIC released a highly critical report covering the four major banks — ANZ, Commonwealth Bank, NAB and Westpac — and their responses to the threat of scams.
According to the report, about 31,100 customers at the big four banks collectively lost more than $558 million to scams in the 2021-22 financial year.
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.
Ms Tonkin wants laws changed to require banks to reimburse customers if they have been victims of a scam through no fault of their own and they did not act with gross negligence or criminality.
"The UK, which is years ahead of us, has identified that reimbursement by banks [is] the right approach to actually tackle scams, so we'll be pushing very strongly for this to be included in the code of practice," she said.
"We've got in the UK a template model that we can adopt or adapt."
Ms Bligh said the ABA endorsed the need for a "higher standard across the industry in preventing and disrupting scams and protecting customers" and had already begun working on new industry-wide standards.
But she said banks should not have to reimburse customers if they had not done their "due diligence".
"A scam is an event where a customer has authorised a payment, and in some cases banks have warned customers not to make the payment and they make the payment anyway," she said.
"I think given that the money that banks are using is the money in your deposit account, we'd want to protect banks from having to reimburse people who have been warned not to make a payment and make it anyway."
Industry code for banks in the works
On Monday, the federal government announced details of its $86 million scam-prevention strategy, including a national centre to facilitate communication between regulators, law enforcement and the financial and consumer sectors.
Financial Services Minister Stephen Jones said the government would also develop a banking industry code of practice this year.
"We'll obviously consult with industry, regulators and consumer groups, importantly, over the content of it," he said.
"But we'll have the final pen. And once we've drafted it and put it in place, it'll be mandatory."
But Mr Jones would not commit to introducing a UK-style system of reimbursement.
"The code hasn't been drafted up yet, but it stands to reason we have a code and [if] there is a breach by a bank or any other institution and they haven't done the right thing, then they're liable."
Sarah Kay, who was scammed out of $25,000 last year, said she was disappointed the government had not committed to making banks responsible for their customers' losses.
"I think it's disgusting because these big banks have a lot of money to work with and the individual is left with nothing," she said.
"If they know they're not liable, they're not going to put much effort into it, but when they know that they're going to suffer a loss, they're going to step up to the plate a lot better."
While the ABA's new digital platform would not have helped in her situation — she was told the money was quickly moved on — she said she hoped it would help others.
"I want to see how that plays out in action and see if it actually does mean that people in the future are actually getting all their funds back or if that's just a way to just calm down the noise," she said.
If you are unable to load the form, click here.
