POPULIST: NZ Commerce minister Andew Bayly
Consumer groups and community legal centres have renewed their call for financial institutions to be liable for their customers’ scam losses, following a move by the New Zealand government to require banks to develop a scam reimbursement scheme.
NZ Commerce Minister Andrew Bayly has ordered the country’s banks to update their Code of Banking Practice to include a scheme that will provide for reimbursement of customers who have been scammed.
In Singapore, the Monetary Authority of Singapore is consulting on a “shared responsibility framework” that would allocate responsibility for scam losses among financial institutions, telecommunications operators and consumers.
Under the plan, financial institutions and telcos would provide payouts to scam victims for a defined set of scams, in cases where specified anti-scam duties are breached.
In November, the Australian Treasury released a consultation paper on mandatory industry scam codes, saying “there is currently no overarching regulatory framework that sets clear roles and responsibilities for the government, regulators and the private sector in addressing scams”.
Code provisions would cover prevention, detection and disruption, response and reporting. Businesses would be required to develop, maintain and implement an anti-scam strategy.
Sectors that may be covered include banking, superannuation, digital currency exchanges and online marketplaces. Currently, telecommunications is the only industry operating under an enforceable (but not mandatory) scam code, the Reducing Scam Calls and Scam Short Messages Code.
When it comes to banks, areas of focus include improving their capacity to recover payments made to scammers, developing more safety measures where high risk customers or transaction activity is involved, and faster response times.
Banks would have to assist a consumer to trace and recover transferred funds to the extent that funds are recoverable. Receiving banks would be required to reverse transfers upon request from a sending bank.
Other bank-specific obligations would include requirement to identify customers at higher risk of being targeted by scammers and to verify a transaction is legitimate where a consumer undertakes activity that is identified as having a higher risk than their normal activity.
Banks would have to ensure customers could act quickly when they suspect a transaction is likely to be a scam, such as deploy an in-app “scam switch”.
A submission to Treasury from a number of consumer groups, community legal centres and financial counselling bodies said the code should go further, including liability for reimbursement.
The submission said: “The only workable framework that will effectively disrupt scams and protect consumers would be a presumption of reimbursement of scam losses, with industry bearing the onus of proof otherwise.
“If the money lost to scams were to come straight out of the bottom line of the industries that are the gatekeepers of people’s money, personal and online information, industry will be incentivised to significantly increase its investment in measures and new technologies to keep their customers safe and secure.”
In response to the New Zealand government’s move, the group said: “Inaction on scams is creating a perfect storm for people living in Australia, exposing the country’s vulnerable banking and communications infrastructure to criminal gangs and turning us into a honeypot for scammers.”