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There is a strong case that banks and other payment providers in Australia (and New Zealand) should be made to do the same. Scam-related losses are soaring, and banks are falling short of detecting, stopping and recovering losses.
While the biggest losses came from investment scams (totalling $1.5 billion), payment redirection scams – where a scammer impersonates a business or individual asking for payment – amounted to A$224 million.
What are Australian banks doing?
While banks have dedicated fraud teams to prevent scams and support victims, the most recent review of the four major banks’ processes by the Australian Investments and Securities Commission, published in April, says they detected and stopped just 13 per cent of scam payments.
The review described the banks’ approaches to liability, reimbursement and compensation as “inconsistent and generally very narrow”.
Why the UK has made banks responsible
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It had modest success, with 46 per cent of reported scam losses being reimbursed between 2020 and 2022.
Overall, the UK has accepted the need for a more regimented regulatory approach over a market-based one.
A more pragmatic approach needed
The Australian Banking Association, which represents the banking sector, has strongly argued against regulation supporting mandatory reimbursement. It has even been suggested this could increase scamming losses because of the risk customers will take less care if they know any losses will be covered by their bank. It has called for greater personal responsibility in preventing scam losses.
Muhammad Al Mamun is a senior lecturer in finance at La Trobe University. Muhammad Al Mamun does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.