The government’s proposed reforms to laws on financial scams let the banking system off the hook, are inferior to policies applied overseas, are complicated for victims and will not be legislated before Australians lose many more billions of dollars, according to consumer advocates.
The scathing criticism comes after an address by the assistant treasurer, Stephen Jones, who vowed on Wednesday to force banks, telcos and social media platforms to reimburse scam victims if their systems prove inadequate, as techniques used by fraudsters grow increasingly sophisticated.
Jones told the National Press Club he wanted legislation in place before the next election to have mandatory industry codes that outline the responsibilities of the corporate sector and responses required when a person is scammed.
“I just want to be very clear on this, nobody gets a free pass here,” said Jones.
“We are lifting the standard across the entire ecosystem.”
He said telcos and digital platforms must cut off the means of scam communication used to contact targets. Financial institutions needed to strengthen fraud protections, with systems advancing “at the same speed as the scammers”.
The government proposal, which adopts several measures advocated by the banking sector, is seen as overly complex and less consumer friendly than impending mandatory UK reforms whereby banks will soon be forced to reimburse out-of-pocket customers, except in very limited cases.
Under the UK reforms that have already been adopted by some institutions, scammed customers are only held responsible if they have acted with gross negligence, such as ignoring a bank’s specific warnings about a questionable transaction.
The principle behind the UK reforms is that victims are protected while the industry gets a financial incentive to improve its scam protection systems. By doing so, UK banks will minimise their reimbursement costs.
In the UK, separate laws are used to oversee the role of other sectors, such as digital platforms, in allowing scams.
The chief executive of the Melbourne-based Consumer Action Law Centre, Stephanie Tonkin, said while she supported the Labor government sentiment, its response was too slow and inadequate.
“We still don’t have a concrete plan or timeframe for when these laws are going to come online and start protecting people, and in the meantime, we’ve got the status quo of banks reimbursing just a fraction of scam losses when they should be able to prevent and disrupt them,” said Tonkin, who was at the press club event.
“We pay banks to keep our money safe, and therefore the banks should be reimbursing that money to their customers for failing to protect them.”
She said the government proposal was “too vague” and did not offer a clear reimbursement route, like the UK system does.
“What was described sounds like a mess. It sounds so incredibly complicated that a consumer is going to have to navigate different sectors, it literally cannot work.”
In 2023, Australians lost $2.74bn to scams, according to the competition regulator, marking a 13% decrease on the prior year.
But the figure is still much higher than losses suffered by UK consumers despite the vast population differences, highlighting how susceptible Australians are to sophisticated schemes that threaten to escalate through AI advances, such as voice cloning.
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Mule accounts
Governments around the world have been grappling with the rise of authorised push payment fraud, whereby a person is tricked into making a transaction.
The money is typically transferred from a target’s bank account, and rapidly distributed to numerous so-called mule accounts at other financial institutions, set up by accomplices – some willing and others unwitting.
The proceeds are often filtered through a dozen or so mule accounts, often housed in Australia’s big banks and regional counterparts, before being promptly sent overseas or used to purchase crypto, out of the reach of authorities.
In Australia, victims of such crimes are almost always liable for the losses, despite the laundering system operating under the nose of banks.
Jones said the current laws were not adequate for Australia and that the previous government had “shifted all of the responsibility on to consumers”.
Jones confirmed the proposed reforms would not be retrospective.
The assistant treasurer said on Wednesday he didn’t believe the UK reforms were sufficient for Australia.
“If I thought it was a fit for purpose solution here in Australia, I’d recommend that our government did it, but I don’t,” Jones said.
“I am deeply concerned that there is not enough weight put into prevention. It’s a compensation scheme. Yep, that’s good, but surely the objective has got to be to prevent your country being a target in the first place.”
Kim Sawyer, a former finance academic who has been advocating for reforms after being personally scammed, said the proposed reforms were “all bark and no bite”.
“The bottom line for victims is whether they’re going to be protected or reimbursed,” said Sawyer.
“The banks allow the mule accounts to be established and money to be laundered. They are central to the scams and a safe house for scammers.”