The federal government is cracking down on scams. How does Australia compare to other countries?
A scam can destroy a victim’s life.
People have told me about being forced out of retirement, missing mortgage repayments, taking out big loans and cutting back on essentials.
Organised crime groups are running increasingly sophisticated scams with many imitating trusted institutions.
Just ask Ilya Fomin who was scammed out of $280,000 during the purchase of his first home.
Mr Fomin admitted making mistakes but he thinks there were also systemic failures.
“There are at least two banks, a law firm, me and the legislation which allowed this to happen,” he said.
The Albanese government agrees the system is failing too many, underscored by $2.7 billion in losses last year alone.
Ilya Fomin thought he was emailing his law firm but he was corresponding with criminals who lured him into paying them $280,000.
Currently few scam victims are repaid by their bank.
How to prevent more people losing their life savings and who should foot the bill is a dilemma being grappled with around the globe.
Last week, the Australian government announced long-awaited draft laws which they claim will provide the best protections in the world.
The headline-grabbing details were about new obligations for banks, telcos and tech giants with massive fines and compensation if they don’t meet them.
But key details were missing and it’s not yet clear exactly how the reimbursement scheme for scam victims might work.
Who should cough up?
Under the draft laws scam victims can seek reimbursement by making one complaint not just against their bank but multiple companies.
The complaint will go to the ombudsman, known as AFCA, and can include several parties accused of failing to stop the scam.
That might include: the banks involved in sending and receiving the money, digital platforms like social media, direct messaging services, search engines and telcos.
The ombudsman will then work out how much each company is responsible for reimbursing.
The United Kingdom has taken a very different approach — a reimbursement model which forces banks to quickly pay back victims.
Australia’s banking industry campaigned hard against the UK model — they argued it would make the country a “honey pot” for scammers, by reducing personal responsibility and letting other industries off the hook.
The minister behind Australia’s new draft laws, Stephen Jones is critical of the UK scheme.
He says it fails to put enough emphasis on prevention, has limited scope and an unfair focus on banks while leaving out other industries.
Consumer groups are satisfied with aspects of the draft plan, but they fear desperate victims will be trapped in lengthy reimbursement disputes.
Assistant Treasurer Stephen Jones has told the ABC that more needed to be done to protect Australians from scams. (ABC News: Mark Moore.)
Stephanie Tonkin from the Consumer Action Law Centre is calling for a modified UK model.
“Put the banks on the hook to reimburse customers for their scam losses and have the banks sort out the apportionment and liability behind the scenes with the other providers,” she said.
The tech sector shares her concerns. Peak body DIGI warned it “could take years for any form of reimbursement”.
That’s caught the ear of Senator David Pocock.
This week he appeared alongside scam victims to criticise the government’s rejection of the UK model.
“We’ve seen in the UK that this is working. So why aren’t we doing it here?” he said.
Greens senator Nick McKim told the ABC he also favoured the UK model.
“A strong example of what should be done here,” he said.
The UK model where the banks are forced to pay up
The percentage of total “Authorised Push Payment” scam losses that were reimbursed to consumers in the UK by the 14 largest banking groups in 2023. (Supplied: Payment Systems Regulator UK)
The UK model is a world-first scheme that will begin in October, forcing banks to reimburse a customer, unless they have acted fraudulently or with gross negligence.
Most customers will be repaid within five business days.
It’s a bold experiment to see if making the banking industry liable will drive down losses by pushing them to invest heavily in detection and prevention.
The cost of reimbursing customers is split between the sending and receiving bank.
But the maximum a customer can be reimbursed has recently been slashed right back from $811,000 (415,000 British pounds) to $166,000 (85,000 British pounds).
Unlike Australia where few scam victims are reimbursed by banks, UK financial institutions have been paying them back for years.
A voluntary reimbursement scheme began in 2019 and last year resulted in banks paying back 67 per cent of money that was lost.
Is the UK a honey pot for scammers?
More scams are being reported, but the amount lost in 2023 fell by 12 per cent to 341 million British pounds compared to the previous year, according to authorities.
Draft laws targeting scammers will put new obligations on banks, telcos and tech giants, with massive fines if they don’t meet them. (ABC News: Billy Cooper)
The UK regulator has rejected claims its model attracts scammers.
Instead, it maintained the opposite was happening.
“We are encouraged by the progress,” the Payment Systems Regulator said.
Bank customers in the UK are also protected by confirmation of payee technology.
Customers can check an account name and other details to ensure they’re paying the right bank account.
If they don’t match – a customer gets a warning.
The UK’s banking regulator estimates the technology has prevented between $12.7 million and $37.3 million worth of scams each year.
Australian banks won’t have that technology in place until 2025.
New Zealand considering putting banks on the hook for scam losses
Change is also underway across the ditch in New Zealand, with the government calling on the banking sector to investigate a voluntary reimbursement scheme.
Consumer Affairs Minister Andrew Bayly called out the banks in an open letter saying the status quo where scam victims bear the losses needed to change.
The New Zealand Banking Association has been working on a proposal and will report back to the government within weeks.
That’s not all, New Zealand customers will get confirmation of payee technology before Australian customers — by the end of the year.
Singapore cracking down on dodgy texts
Also in our neighbourhood, Singapore is considering a novel scheme to crack down on phishing scams.
They’re those pesky text messages or emails pretending to be from a bank or another company designed to steal your personal information and money.
First home buyer Ilya Fomin lost $280,000 in a scam which he described like being in a nightmare he couldn’t wake up from. (ABC News: Brendan Esposito)
That proposal would set obligations on both the telco and the bank involved and if they breach those obligations they would have to pay back the scam victim – with the banks facing greater responsibility.
Back in Australia, criminals will continue to wreak havoc by destroying the financial lives of people like Mr Fomin.
The government can expect plenty of robust debate on whether its draft plan is the right one — but there’s growing consensus amongst industry and the public that the status quo is unacceptable.
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