The rise in both quantity and complexity of scams is resulting in considerable financial and other forms of harm to Australians, particularly the most vulnerable.
In the 2021-22 financial year, over 31,700 clients of the four major banks in Australia suffered a collective loss of more than $558 million due to scams. This represents a significant increase of 49% in the number of affected customers and 50% in financial losses as compared to the preceding year. Over the same period, the banks provided approximately $21 million in compensation and/or reimbursement payments to those who had been defrauded.
In a new report titled Scam prevention, detection and response by the four major banks, the Australian Securities and Investments Commission (ASIC) examines the approaches taken by the major banks to prevent, detect and respond to scams. This article explores this stark review which identifies where the big banks are falling short in combatting scams.
Key findings
ASIC found that:
- Bank customers are overwhelmingly the bearers of scam losses, accounting for 96% of total scam losses across the banks.
- Collectively, the banks detected and stopped a low proportion of scam payments made by their customers (approximately 13% of scam payments).
- The reimbursement and/or compensation rate varied but was low across the individual banks, ranging from 2 to 5%.
- Customers who made a complaint were more likely to receive some form of compensation payment from their bank, compared to customers who did not.
- Across three banks for which data was available, reimbursement and/or compensation was paid in only around 11% of the cases where there was a scam loss.
- The overall approach to scams strategy and governance was highly variable and, overall, less mature than ASIC expected.
- Banks had inconsistent and narrow approaches to determining liability.
- Scam victims are not always well supported by their bank.
- There are gaps and inconsistencies in the abilities of the banks to detect and stop scam payments.
- While there were examples of emerging good practice, steps taken to help prevent customers fall victim to scams varied across banks.
“We’d like to see the banks take steps to evolve their scam management practices, including how they inform and educate customers and help them through what is a distressing time”, said ASIC Deputy Chair Sarah Court.
Ms Court strongly encouraged all banking and other financial service businesses to consider the findings outlined in the report.
Why the focus on major banks?
ASIC’s report focussed on Australia’s four major banks as they are at the forefront of scam prevention, detection and response in Australia.
However, it is also critical for other organisations to help minimise the impact of scams on the Australian community.
“ASIC expects that this review will aid banking and other financial service businesses, telecommunication providers, digital platforms and other organisations in developing consumer-focussed scams management practices and strategies,” said Ms Court.
Key takeaways
Increasing numbers of Australians are being affected by scams, particularly bank customers. ASIC has found that the big banks are not doing enough to detect and stop scams, or to compensate and support affected customers. Banks, as well as other organisations, need to do more to ensure that they have robust scam management practices in place.
