Complaints surge about banks not doing enough to prevent scams

The number of complaints made by Australians over payment scams has surged over the last financial year, with the Australian Financial Complaints Authority (AFCA) reporting an 81 per cent increase – significantly more than any other type of complaint.

AFCA receives complaints about many financial services providers, including super funds and insurers, but issues about banks facilitating payments to scammers via transaction accounts is a major issue for complainants. Total complaints to the authority for the past financial year rose 9 per cent.

Assistant Treasurer and Financial Services Minister Stephen Jones says prevention of scams is the first line of defence.Credit: Sydney Morning Herald

Stephanie Tonkin, the chief executive of the Consumer Action Law Centre, describes the increase as “off the charts”. She says it shows banks are not doing enough to stop payments to scammers in the first place, and not doing enough to provide customers with redress.

Overall, however, the good news is that financial losses from scams declined in 2023, for the first time in many years, likely due to the impact of targeted and co-ordinated disruption activities, though the number of scam reports continued to rise.

The Albanese government recently established the National Anti-Scam Centre. Its role is to help with reporting of scams for earlier intervention; real-time sharing of intelligence with banks, telcos, social media and regulators; and better support for victims of scams.

The government is rolling out a framework to reduce scams, under which banks, telcos and social media platforms will have to comply with measures designed to better ensure they prevent, detect, disrupt and respond to scams.

While financial penalties will apply to companies that fail to comply with their obligations, the government has stopped short of requiring banks to reimburse customers for scam losses where customers are at no fault.

Anna Bligh, the chief executive of the Australian Banking Association, said on Network 10’s The Project that banks are legally required to follow a customer’s payment direction, and that banks delay suspicious payments and warn customers.

In a speech to the National Press Club, Financial Services Minister Stephen Jones said a salient fact of scams is that they are transactions that are authorised by the victim.

“Compensation for inaction, for negligence, for failing to meet an obligation is a critical part of our framework … but it should not be the first line of defence; prevention is,” he said.

The threats will evolve as technology advances, with artificial intelligence an obvious example, he said. “Imagine the danger [they] can do once they can impersonate you or your loved ones,” Jones said.

Telcos and social media need to cut off the means of communication for scammers, and banks and other financial institutions need to strengthen protections, he said.

AFCA provides free help for consumers and small businesses with financial disputes concerning banking, credit, insurance, advice, investments and superannuation. Complaints should first be pursued with the financial service provider.

AFCA can be contacted on 1800 931 678.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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