Banks promise anti-scam technology, but can’t say when it will be ready

Saturday, 16 September 2023

Overseas criminals have set up sophisticated scams to prey on the public, using local criminals to operate ‘money mule’ accounts to get money out of the country.

The public should not bank on key anti-scam defences being promised by banks being in place by Christmas, or anytime soon after.

On Friday, the Banking Association Te Rangipū Pēke, which represents the powerful banking lobby, announced banks would work together and invest in systems to protect customers from the scam crime wave sweeping the country.

The pledge came after rising public anger that New Zealand banks lacked systems used by banks overseas which can identify “red flags” that someone is the victim of a scam.

But Banking Association chief executive Roger Beaumont said it was unrealistic to expect the banks to have the promised anti-scam measures in place quickly.

“It’s not as simple as flicking a switch and making it happen. These are complex pieces of work,” he said.

“This is a commitment to get it implemented as quickly as is practicable. I’m not going to put a timeframe on it.”

The public is facing an unprecedented scam crime wave, with overseas criminals using texts, fake websites, and online advertising to dupe their victims.

Estimates from the Ministry of Justice indicate the number of fraud and deception crimes has risen to 510,000 from 288,000 the previous year.

Scam victims have cried foul that banks do not have systems in place to check that when people make payments, the names and numbers of the accounts they are sending the money to match.

Real estate agent Carla O’Neill said Bank of New Zealand (BNZ) raised no red flags when she transferred money to “invest” with Citibank, despite the money going to an ASB, not a Citibank account, and despite the name of the account the money was going to not matching the name she had filled in to make the transaction.

In Friday’s announcement, banks promised to bring in “confirmation of payee” (COP) technology to check the account name and number match before payments are made.

COP is already in place in the United Kingdom and Australia, and was recognised by banks here as a weakness in their systems at least as early as 2020, though news reports revealed the issue more than a decade ago.

Jon Duffy, chief executive of Consumer NZ, said: “Their announcement today is an admission the banks have realised that COP capability would stop their customers being defrauded. The fact they haven’t implemented it is an indictment on them.

“They should be compensating anyone, from the point of their admission on, who falls victim to a scam they could have prevented.”

Duffy is the consumer representative on the board of the Banking Ombudsman, which people complain to if banks won’t compensate them after they are scammed.

Jon Duffy, Consumer NZ chief executive, says it is an ‘indictment’ of banks they now recognise they should have ‘confirmation of payee’ systems in place.

The Banking Ombudsman can order compensation in instances when banks fail to provide services that meet minimum legal standards, or breach the Banking Code of Practice.

“You could argue this is an admission they haven’t been providing their services with reasonable care and skill under the Consumer Guarantees Act, and is probably a breach of the Banking Code of Practice,” he said.

In Duffy’s opinion that could give the Banking Ombudsman the power to order compensation, but he said Banking Ombudsman Nicola Sladden was independent, and the board was not there to influence her decision-making.

The ombudsman is currently investigating complaints from scam victims who believe a COP system would have saved them from losing hundreds of thousands of dollars.

Beaumont said COP was not a silver bullet that would stop all scams, and the most important defence against scams was educating the public.

Scam victim Borja Ares believed banks had failed to invest in scam protection because they were not held liable for scam victims’ losses.

A poll by Horizon Research indicates the public agrees with Ares that banks should compensate the victims of scams in cases where there were “red flags” they should have spotted.

It showed 73% of people felt banks should provide full compensation in such cases.

Commerce and Consumer Affairs Minister Duncan Webb is looking forward to ‘better results’ from banks.

It’s not just public pressure that’s been coming on banks.

Commerce and Consumer Affairs Minister Duncan Webb said he’d been talking to banks about rising scams and fraud.

Borja Ares is a victim of the Citibank investment scam. He says banks are ‘doing very little, but were very good at covering their backs to pretend they were doing something’.

“I have made it clear that I expect them to do everything they can to protect customers from scammers,” Webb said.

“I look forward to better results for customers. I will continue to monitor the situation closely.”

Beaumont said banks would now support the creation of a Singapore-style anti scam centre to coordinate national defences against fraud.

“A number of banks have been and investigated it, and there are some more going. We are looking very, very seriously, at how we can learn from what’s worked in Singapore, and things we can improve on,” Beaumont said.

An anti scam centre could become the conduit for information to pass between banks, such as sharing information on “money mule” accounts, so they can be frozen to prevent scam victims’ money being sent overseas.

Duffy said New Zealand needed an anti scam centre, and one that the banks did not control.

“It should be an independent agency, and it needs some government funding,” he said.