We are all losing in the scam economy. Now there is a plan to act

Sometimes a question in federal parliament has the power to cut through the humbug and remind everyone of a problem they need to talk about more often. That’s what happened last week when Russell Broadbent asked Jim Chalmers about the financial fraud sweeping the country.

Broadbent, a Victorian MP who represented the Liberals for decades but now sits on the crossbench as an independent, told parliament about a couple who had lost $100,000 to a financial scam and a friend who had lost $40,000. Turning to the treasurer, he had a simple question: “What more can we do to protect the Australian people from this evil?”

Illustration by Simon LetchCredit: Supplied

Chalmers answered with a brief outline of the action so far and a promise of more to come. But he also included a number that admitted a huge hole in public policy. In 2022, he said, Australians lost $3 billion to scammers. Yes, $3 billion!

That is a lot of financial damage. And a lot of personal pain. Money is moving so fast through the Australian economy, at the touch of a mobile phone screen and in a blizzard of numbers, that the scammers are having a field day. The digital economy has given rise to the scam economy.

While it’s true that cheats and charlatans have been around as long as money itself, it has become dangerously easy to fleece Australians of their savings. Take, for instance, the Sydney couple who just lost $284,000 on a new home when their conveyancing firm was hacked.

Unfortunately, that conveyancing hack is not a new idea. A Melbourne couple lost $250,000 to a variation of the scheme in 2018. So, blaming the victim does not stop the problem. The property and conveyancing profession, the legal fraternity, the banks and the government have not been able to slow or stop this fraud over a full six years. The obvious conclusion is that they have not been trying hard enough.

Assistant Treasurer Stephen Jones has a plan to clamp down on online financial scams.Credit: Alex Ellinghausen

Two days after Broadbent’s question, another scam experience went viral. In an article that must have been painful to write, American columnist Charlotte Cowles admitted to losing $50,000 to a group of swindlers who hooked her with a phone call that looked like it was from Amazon. The call “spoofing” drew her into a conversation with someone pretending to be from the Federal Trade Commission, then another pretending to be from the CIA. It sounds outlandish, but it worked.

Can it happen here? Yes. In fact, it happens every day. The opening move is a call to a mobile phone that looks like it comes from a reputable company or agency. This spoofing is possible in Australia, just as it is in the United States. At Telstra, for instance, the company blocks 10 million scam calls each month, and it can manage phone numbers being misused on its own network. But it says spoofing can still occur with calls that originate from outside its network – such as overseas.

In the Chinese community, for instance, scammers are calling people using a caller ID that looks like an official Chinese police number. They send their targets fake documents that look like arrest warrants. The Australian Competition and Consumer Commission, which runs the National Anti-Scam Centre, says the scheme uses mobile calls and video calls from multiple people who pose as police or other authorities. One young man paid $400,000 after being convinced he was about to be arrested.

We all think we won’t fall for a hoax, but nobody is immune. I am not writing this because I have lost money. The point is that too many of us are being stung, whether it’s by a fake text message about a road toll or an elaborate scheme that takes our savings.

Banks, telcos and social media companies provide the “ecosystem” for online scams.Credit: Istock

So what is being done? That is up to Stephen Jones, the assistant treasurer. He has spent some of the past four months going to 60 community forums to get feedback on a new “scams code” to be set up this year. One positive sign: Jones says he heard audible groans from the audience whenever someone talked about calling their bank to report a scam. He knows how long people wait on hold.

Treasury is drafting a new law to impose mandatory obligations on the industries that make up what the government calls the “ecosystem” for these scams: banks, telcos and social media companies. Jones wants to designate the sectors that must comply with new obligations on how they respond to fraud. That will include how long they take to act when a customer reports a scam.

The social media companies will be part of the new code because they often spread the deceptions in their promoted content. Just as a news masthead could be held to account for advertising a fraud, so should Facebook and its owner, Meta. “It’s not like Meta is a struggling start-up,” says Jones.

Banks will have to pay a penalty if they do not meet the new obligations. So will others. The ACCC will enforce the fines on those who do not comply with the code. Jones does not expect this to eradicate scams – because new ones are launched as soon as old ones are shut down – but he wants the code to impose a higher cost on crime.

“Our objective is to make Australia the hardest place in the world for them to do business,” he says. What he will not do, however, is ask the banks to reimburse every victim who loses money.

This is a sticking point because consumer groups want the government to force banks to compensate customers who lose money through no fault of their own, along the lines of planned laws in the United Kingdom. This masthead reported on this call last week. There will be a heated debate about whether Labor comes up with a strong regime that really works.

Jones argues that banks should not have to pay if the social media company is at fault, or some other company deserves primary responsibility for the scam. This is a fair point. In the end, however, industries will have to pay a price if their collective complacency allows fraud to thrive. Without that pressure, the incentives to stamp it out are too weak.

The ACCC says there were 301,000 reported scams last year, up 26 per cent on the year before, but nobody knows the real cost because many Australians will never own up to being conned. What we do know, however, is that the scam economy is huge and growing. And it is about time it had a recession.

David Crowe is chief political correspondent for The Sydney Morning Herald and The Age.

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