Australia’s major banks slammed for failing to stop $550m worth of scams

The big four have been heavily criticised for their “tight-fisted and mean approach” when people lose millions to scams, which they are also failing to prevent.

Australians who bank with the big four lost a whopping $550 million to scams in the last financial year with the organisations heavily criticised for causing further distress to victims by failing to stop fraudulent transactions and rarely paying back the missing money.

A report from the corporate regulator ASIC revealed the shocking hit Aussies are taking when it comes to scams as Westpac, Commonwealth Bank, NAB and ANZ have reimbursed only 2 to 5 per cent of customer losses.

It also revealed the banks collectively stopped just 13 per cent of scam payments.

Yet, there was more than $558 million lost by 31,700 customers through scams last financial year and only $21 million was reimbursed.

News.com.au has revealed the devastation felt by customers who have fallen victims to scams, including an ANZ customer who had $50,000 drained from his account and a NAB customer who had her entire pay stolen in 25 fraudulent transactions made at a Sydney brothel.

There was more than $558 million lost by 31,700 customers through scams last financial year. Picture: Supplied

The Australian Competition and Consumer Commission also revealed an alarming rises in scams with Australians losing a record $3.1 billion to scams last year – an 80 per cent increase compared to 2021.

Meanwhile, ASIC found bank customers are overwhelmingly the bearer of scam losses, accounting for 96 per cent of total scam losses across the banks.

ASIC deputy chair Sarah Court said its review found there were inconsistent experiences and outcomes for customers who were the victim of a scam, and in some cases a bank’s response may contribute to further distress for a customer.

“Banks need to reconsider the ways they respond to and engage with scam victims to reduce further distress and help them better manage the situation,” she said.

“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.”

The review also criticised banks for failing to detect and stop scam payments and said the institutions had “inconsistent and narrow approaches to determining liability”.

Sarah Court, ASIC Deputy Chair. Picture: Supplied

Consumer groups have been calling on the major banks to block payments to scammers, make systems safer and reimburse victims.

Consumer Action CEO Stephanie Tonkin said the report was “damning” of the major banks’ response to scams.

It showed they are leaving their customers to pay the price for scammers who are highly organised and getting more sophisticated, even impersonating the banks themselves, she added.

“The four major banks have the resources, data, and technology to prevent scams occurring on their platforms and from their accounts, but their patchwork efforts have failed to prevent billions of dollars in losses and fall far short of what their customers and community would expect,” she said.

Ms Tonkin described Australia as a “soft target” for scammers.

“We speak to people who call our helplines who have lost their entire life savings, everything, to scammers, causing disaster for them and their family, it’s heartbreaking,” she said.

“I am sure all bank customers will be shocked to learn that a paltry 2-5 per cent of scams losses are reimbursed or compensated by the major banks.

“This tight-fisted and mean approach is totally unacceptable at a time when banks are posting record multibillion-dollar profits.”

Consumer Action CEO Stephanie Tonkin. Picture: Supplied

Ms Tonkin called on banks to introduce reimbursement guarantees for people who have done nothing wrong and fallen victim to a scam.

“Banks have a duty to make their payment systems safe for customers, but there is a lot more that needs to be done to help people who have been scammed,” she said.

“We also need to stop blaming scam victims for their loss – this kind of narrative is not appropriate for other victims of crime, we need to do more to support victims of scams.”

Westpac has said it will begin to alert its customers of a potential account name mismatch for payments or if a customer is seeking to transfer money to an account Westpac has never transacted with before.

Commonwealth Bank’s has recently introduced a NameCheck function, while real-time personalised messages will now pop up on the phones of NAB customers performing out-of-character transactions in the NAB online banking and smartphone app.

Consumer groups want the federal government to force banks to reimburse customer’s scam losses. Picture: Supplied

But the current lack of financial incentive for the banks to fix the issue has meant that innovation and improvements are too slow to be implemented across the sector, Ms Tonkin added.

“The federal government must intervene now and pass laws forcing banks to reimburse customers for scams losses, except in circumstances of gross negligence,” she added.

“We now have the evidence from the ACCC and ASIC within a week, that mandating action by the banks is the only way to incentivise the investment needed to tackle the scams crisis affecting Australia.

“The UK Government is leading the way, the federal government needs to follow suit to send the message to scammers that we are not a soft target.”

The consumer group also wants to see consequences introduced for banks that hold the scammer’s accounts too.

Ms Court added “combating scams is a critical task for all of corporate Australia – financial institutions, telecommunication providers, digital platforms and other organisations need to work cohesively to stop scams at the source”.