An international telecommunications firm is the first company to breach Australia's anti-SMS scam rules, months after the regulations came into effect.
Modica was found to have broken industry standards by failing to protect its customers from exposure to potential text-based scams.
The Australian Communications and Media Authority said the telco allowed customers to send messages using text-based identities without properly checking they weren't being used to perpetrate scams.
ACMA chair Nerida O'Loughlin said under Modica's system, scammers could trick customers by posing as legitimate organisations such as government agencies, financial institutions and tolling companies.
"This is a widely used trick used by scammers to gain consumer trust," she said.
"Sender IDs generally display as a name on mobile phones and impersonating well-known brands allows the texts to slip into legitimate message streams from the brands."
According to the watchdog, the company did not have the appropriate processes in place to ensure all customers provided evidence to confirm they had a legitimate case to use the text-based sender IDs.
Ms O'Loughlin noted the watchdog didn't find any evidence scammers had used the vulnerability in Modica's systems, but its failure to put proper processes in place had exposed people to the risk of scams.
Under rules established by ACMA last year, telcos must meet a list of requirements to help identify, trace and block SMS scams.
Modica received a warning and must implement proper systems or face penalties of up to $250,000.
The code, set up in July last year in response to the growing number of SMS-based scams, was developed alongside industry peak body Communications Alliance.
Companies are required to share information about scams with their competitors and report identified scams to authorities.
Since July 2022, Australian telcos have reported blocking almost 90 million messages under the new rules.
Last year, financial losses from SMS scams increased by 188 per cent compared to the previous year, from around $2.3 million to over $6.5 million.
SMS scams accounted for about 32 per cent of all reported scams in 2022.
