New scam-busting banking system not good enough says campaigner

Thursday, 10 October 2024

A new bank-owned company will be at the heart of the scam-prevention banking system the government demanded banks set up to better protect their customers, however a leading anti-scam campaigner says more needs to be done.

Get Verified Limited will manage the planned “confirmation of payee” (CoP) system, which will allow banks to nearly instantaneously check with each other that the names and account numbers match, before their customers made account-to-account payments.

Customers would be notified when the account names and numbers they had entered did not match.

Banks came under heavy criticism for weaknesses in their anti-scam defences when a tidal wave of scamming and fraud swept the country, and commerce and consumer affairs minister Andrew Bayly demanded action.

But hopes that the CoP system would be in place by the end of the year have not eventuated, and its full rollout would be completed for major and many smaller banks by April next year.

The banks that are so far intending to join the CoP scheme are ANZ, ASB, Bank of China, BNZ, China Construction Bank, The Co-operative Bank, Heartland Bank, the Industrial and Commercial Bank of China, Kiwibank, Rabobank, SBS Bank, TSB, and Westpac.

Get Verified is jointly-owned by ANZ, ASB, BNZ, The Co-operative Bank, Heartland Bank, Kiwibank, Rabobank, SBS Bank, TSB, and Westpac, but the technology it is using for the CoP system is provided by British open banking technology company Obconnect.

Anti-scam campaigner and Post contributor Janine Starks, who has helped scam victims fight for compensation from banks, said CoP needed to be complemented with a second scheme the banks were not talking about.

The largest scam losses had been for investment scams, where professional criminals based overseas manipulate people into thinking they are making legitimate investments with legitimate banks and financial institutions. The criminals had already found a way to go undetected by the CoP system, even before it was deployed.

“CoP no longer helps large-scale investment fraud because shell companies are now set up and bank accounts opened in these names,” Starks said.

“This means the name and account number will match and these frauds will continue,” she said.

It was time banks worked together to create a system of “verified” payees for legitimate financial service providers.

“When are our banks going to listen to calls to make every financial service provider join a list of verified payee accounts and ensure internet banking screens are altered to prevent payments for investments going to non-verified accounts?” she said.

Bank staff also needed to be better-trained in scam detection.

“Even branch managers can no longer recognise valid accounts for investments to be paid to,” she said.

“There are only a limited number of registry and custodian accounts which most providers use along with well known client trust accounts for brokers. These do not include names like ‘CEB Holdings’, ‘CADT Holdings’, ‘Eden Services Group’, ‘Solar Green’ or ‘Argus International’,” she said.

These were accounts used in investment scams used to rip-off New Zealanders who Starks has helped for free in their quest for compensation.

“These are clear red flags and yet customers are being assisted in paying into accounts such as these with no controls or checks in place and losing six-figure, life-changing sums.

Bayly was happy with bank progress.

“In my open letter to the banks in February, I outlined several of my expectations of the sector, including the introduction of a confirmation of payee system. I am pleased to see this being implemented and look forward to continued progress in this area.

“This new system will give Kiwis greater peace of mind by allowing them to confirm that the name of the person they’re paying matches the bank account details before they send any money.”

While the CoP system may not raise alerts all scam attempts, it will help to reduce accidental mis-directed payments.

Currently, someone making a payment could enter the correct account name of the person, or business they want to pay, but if they got a digit wrong, the money would go to the wrong account.

Getting that money paid back required the approval of the account-holder who had received the money, the Banking Association said.

The effectiveness of CoP systems to reduce mistakenly-directed payments has been demonstrated by ASB parent bank Commonwealth Bank of Australia.

CBA announced an “Australian banking first” in February last year with the introduction of its Namecheck technology to give customers an indication of whether the name and account details they entered looked right.

The technology prevented more than 10,000 scam payments which would have totalled in excess of an estimated A$38 million by November the same year, and had reduced mistaken payments by more than A$100m.

Banking Association chief executive Roger Beaumont acknowledged that it would take different banks different lengths of time to test and deliver the system.

“The technology build and integration of the new service differs across banks, so it’s unsurprising that each bank’s testing and delivery phase looks slightly different,” he said.

Beaumont said a “phased” rollout had happened in the United Kingdom, when it rolled out CoP several years before New Zealand began down the same line.