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Tag: Banks

Scam Crime and the Response

3 February 2022

It is no secret that computer and phone scamming are now hugely common crimes. A couple of years ago, I got  new landline as it was only a few extra dollars on my data plan. The number was not known to my friends and there are no phone books these days, so the only calls I got were surveys or scams or both.  I was nearly conned, but when ‘Telstra’ asked for my credit card to fix my line I woke up just in time. Others in the house were scammed. The government has a Scamwatch, but it is only interested if you actually lose money and it seems very desultory about taking action.

The Police are not interested. As criminals go from mugging and burglaries to scamming there is less violent crime, but prison numbers continue to rise at vast cost to the taxpayer and with minimal rehabilitation- the recidivism rate remains high, which is unsurprising in that there are few jobs, little housing and a stint in gaol getting different friends and new skills makes reoffending more likely.  Telling the Police or the government about scams seems to have no effect.

Some years ago as I collected more and more credit and loyalty cards they filled my wallet to bursting.  As I paid for a restaurant lunch in a small cafe I dropped quite a lot of the cards and picked them, apparently bar one.  I went back to work and a few hours later was called by the bank that asked if I had made a couple of big purchases in Sydney without signing and then flown to Melbourne, as someone had done this using my credit card.  I had not, and the bank did not charge me for whoever had.  That seemed good, but it is also an explanation for why credit card interest rates are so high.  Presumably the person who got the card also got away scot-free; an unreported crime.

Recently a friend asked me to befriend a Nigerian medical student who is apparently honest and does not scam, but has a lot of trouble to advance in his profession as influence-buying and connections are necessary and he does not have these.  I was informed that in Nigeria there are few jobs, the money goes overseas and scamming is the major source of income for a whole class of young people, particularly men.  Now as one gets a few scam calls each day and sometimes the phone even warns about this the whole situation is becoming ‘normalised’.  Some of us might hope that the government that is so ‘tough on crime’ that it locks so many people up, might actually recognise that the type of crime is changing and go after scammers and cyber criminals or even take some measures to prevent this. Surely taking advice in real time- calling the number, blocking them or listening to them to gain evidence for prosecution are all easily accessible remedies that could happen in a very short time-frame.

As the governments do very little, it seems that they want to push it to the banks, who, true to their form do not want to help.  A buck-passing exercise, in short.  Naturally the Australian Banking Association (ABA) said that Australia is ‘world-leading’ in all this.  Perhaps they learned this unconvincing line from the politicians.  The fact that normal transactions might be slowed by checks is one thing, but if we look at the amount of extra time  it takes to board an aeroplane due to fear of crime, we might see this in perspective.

Once again Consumers will have a make a large fuss to that our ‘leaders’ will eventually follow us.

Here is an article from the SMH on the subject:

Banks battle to dodge refunds

Charlotte Grieve 3 February 2022

Australia’s major banks are fighting a push from regulators to force them to refund billions of dollars lost in online scams, arguing requirements to bear the costs of internet fraud could create complacency among consumers and lead to more losses.

In a tranche of internal documents obtained by The Sydney Morning Herald under freedom of information laws, the Australian Securities and Investments Commission (ASIC) detailed ‘‘strong opposition’’ from the banks to proposals for new obligations ‘‘to prevent scams or reimburse customers for losses’’.

Financial scams have increased around the world during COVID-19, with consumers spending more money online during lockdowns and criminals exploiting security vulnerabilities. Australians lose about $2 billion annually to scams, according to estimates from the competition regulator, most of which go unreported.

ASIC is reviewing the ePayments code, a voluntary code of practice that contains consumer protections for electronic payments, in a process that has been plagued by delays.

Australian Competition and Consumer Commission (ACCC) deputy chair Delia Rickard wrote to ASIC in early 2020 calling for scams to be included in its review, but ASIC decided against this after fierce pushback from major banks.

In one document, ASIC noted banks claimed accepting liability for ‘‘preventing customers from falling victim to scams is problematic, as it raises moral hazard issues (there is a risk that customers take less care if they know they will always be backed by their ADI).’’

The UK regulator recently introduced a raft of new protections for consumers affected by scams, including increased liability on banks to reimburse customers who lose money and a ‘‘confirma‘‘confirmation of payee’’ (CoP) mechanism that forces banks to flag payments where the account name does not match BSB and account number.

Both the ACCC and the Consumers’ Federation of Australia (CFA) supported introduction of a name-checking tool in Australia, claiming it would address an increasingly prevalent style of scam known as business email compromise, in which hackers falsify invoices and request payment to fraudulent accounts using genuine business names.

In another document, in comments later deleted by ASIC, the banks claimed to ‘‘already help customers in various ways’’ and said blocking genuine transactions ‘‘is a highly sensitive issue that can lead to challenging interactions for frontline staff’’.

The Australian Banking Association (ABA) has consistently stressed the need for greater personal responsibility in preventing scam losses, which has led some groups to accuse it of ‘‘victim blaming’’.

In one email to ASIC from September last year, the cited ‘‘timing and cost’’ as the main reason for opposing the CoP mechanism while promoting greater consumer education.

An ABA spokesman said Australia was “world leading” in online payments security and pointed to existing initiatives including PayID.

The industry also argued namechecking would increase ‘‘friction’’ and ‘‘substantially delay’’ payments processing and warned of rising customer complaints if new regulations saw banks blocking payments because of minor typographical errors, according to the documents.

The CFA told ASIC that there had been ‘‘blame shifting’’ between banks ‘‘to reduce liability for scam losses’’ and criticised the ‘‘little or no recourse’’ for victims.

It added it would be increasingly ‘‘important to minimise mistaken payments through good system design, rather than relying on moves to get the money back afterwards’’.

Britain’s new regulations force banks to reimburse customers for scam losses if certain criteria are met, using a pool of funds contributed by the banking sector.

An early draft of ASIC’s review showed support for this approach.

However, ASIC became increasingly concerned members of the voluntary code would withdraw participation if new obligations to prevent scams required ‘‘significant investment’’ in new systems.

Rather than introducing regulations similar to the UK, ASIC sought to enhance existing onscreen warnings that inform customers about risks of entering incorrect details.

However, the documents show there was also ‘‘resistance to this suggestion from banks’’ because it would probably ‘‘be expensive and resource intensive’’.

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AUSTRAC and the Banks- is this the Model of Regulation?

3 July 2021

AUSTRAC (Australian Transaction Reports and Analysis Centre) is a small regulator compared to ASIC (Aust Security and Investment Corporation) and APRA (Aust Prudential Regulatory Authority).  But when Paul Jevtovic  was transferred from the AFP (Aust Federal Police) to run  it, it charged the Commonwealth Bank and Westpac with not reporting financial crimes adequately and fined them a total of $2billion. 

Those who us who think that unpunished crime is rampant in the big end  of town  cheered, and wondered if there was any hope that this might set a new norm; regulators might actually start enforcing regulations.  My private hope that they might move from banks to insurance companies, whose antics make the banks look like saints.  But I note that the National Bank, who seem the next cab off the rank have just got Jevtovic to come to them to help them clean up their act, and the new CEO, Nicole Rose is known for a less aggressive style.  This worries me.  Regulators with gentle styles seem to prosper in the bureaucracy, and one might be willing to bet that the National Bank may change its behaviour just in time and be hit with a much lower fine. Presumably the saving will make Jevtovic’s salary look like chicken feed.

What is needed is a Police model.  People speed and get fined. The Police expect them to speed, so have no qualms about fineing them.  It should be the same for corporati0ons. If they can make money doing something they will. That is what Milton Freedman told them to do and what their shareholders want.  If you want them to work within another framework, like an ethical one that lessens their profit, then you had better enforce that framework  or it will be empty words.  Police understand that. Generally ambitious bureaucrats choose not to understand it.

The Headline is about the Banks fighting financial crime- do they really care or is it just when AUSTRAC makes them?

We have to hope that Jevtovic’s move is not just another aspect of the new regulatory model.  

www.smh.com.au/business/banking-and-finance/dirty-money-how-the-banks-and-austrac-are-fighting-back-against-financial-crime-20210625-p5849c.html

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