Which scam loss number should we believe: $200 million or $2.3 billion?

Monday, 18 November 2024

Commerce and Consumer Affairs Minister Andrew Bayly may be the Government’s new scam tsar, but there are different views as to the size of the problem Bayly has been unleashed to tackle.

The scale of scam losses for households and businesses remains a moot point, with actual reported losses, and banks’ claims around losses, far lower than the latest estimate of loss. It means actual losses could be anywhere between $200 million and $2.3 billion a year.

Announcing his role as the government anti-scam tsar, Bayly said new data indicated New Zealanders lost nearly $200m to scams in the past 12 months, though he said: “Considering estimates suggest that only one in five scams are reported, the real losses to New Zealanders are significantly higher.”

That data from PaymentsNZ, which is owned by the banking industry, said $194.3m was lost by customers of 11 banks through scams in the 12 months to the end of September.

That was slightly lower than the $198m of losses reported by the 11 banks last year. but it was far lower in scale than a new estimate of total scam losses released by Netsafe on Monday, estimating New Zealanders lost $2.3b to scammers in the past 12 months.

The number was based on an extrapolation from a survey of just over 1000 people.

That would equate to around 0.6% of GDP, with one in five New Zealand adults having been scammed, an average loss of $3105. However, Netsafe’s sample was skewed towards people aged over 54, and to people with university degrees.

Which is the right number?

“All we know is that is is very substantial,” Bayly said.

Globally, Bayly said: “Scams are the third largest economy in the world. That’s how large it is.”

Netsafe reported that many of the scams were “shopping” scams with people being ripped off by crooks pretending to be legitimate retailers either through standalone websites, or through online marketplaces like Facebook marketplace.

In March this year Bayly issued an ultimatum to banks to put better anti-scam protection in place, and to have a fairer compensation scheme for scam victims.

He demanded the banks put in a “confirmation of payee” scheme in place to check account names and numbers matched before payments could go ahead, which they have started to build, but which will not now be fully operational until Easter next year.

Bayly said embarrassment caused many people not to report scams, but Netsafe found many people saw no point as they did not believe authorities would act, or would be powerless to help them.

“Half of all New Zealanders reported a spike in scam encounters over the past 12 months, yet troublingly, fewer Kiwis are reporting scams to law enforcement,” Netsafe’s chief executive Brent Carey said.

“The report found a 9% decrease in reports compared to the previous year,” he said.

And, he said: “Only 17% of scam victims managed to recover their losses, while 43% attempted but failed to retrieve funds, and 23% didn’t try at all.”

Another group that appeared not to believe action would be taken on individual scams were the 7% of survey respondents who said they would willingly act as the money mules scammers often used to accept money from scam victims into their New Zealand accounts, and then transfer it overseas.

Carey said law enforcement and financial institutions should adopt a victim-first asset recovery process and be transparent in their actions.

Bayly said work was ongoing on an updated scam loss compensation scheme by banks. “There is a way to go,” he said.

Despite Bayly’s activities since March taking the country further than efforts by the previous government, the increased media focus on scams appears to have led to a rise is discontent with politicians.

In its 2023 survey, Netsafe found a quarter of people felt the Labour-led Government’s action on scams to be very bad, and a third thought it very good.

The corresponding figures for the current government were 41% and 22%.

“There’s been a lot of publicity around it. That would colour it,” Bayly said.

Bayly said scam detection, prevention and response had largely fallen between the cracks of industry and government.

“There is no centralised, instantaneous method for reporting scams, which hampers our ability to respond quickly,” he said.

That was not an indication that New Zealand would get a Singapore-style anti-scam centre, which banks had indicated they wanted.

Bayly said New Zealand did not need a “bricks and mortar” centre. What it needed was better coordination between government and industry players to share information, and shut down threats.

The Government, like the last one, has remained coy on taking action against big social media companies that host scammers and scam adverts; especially Facebook, WhatsApp and Google, which are the three most popular social media platforms for scammers, Netsafe reported on Monday.

Big bank chief executives have complained about how long it takes for social media companies to act, even when they are told about a scam advertisement.

Professor Alexandra Andhov from the University of Auckland’s Business School said: “Big Tech companies like Meta wield immense influence over our daily lives with minimal regulatory oversight. It’s crucial to establish stronger frameworks to ensure accountability and protect people from the risks these powerful entities pose.”

Bayly said he was working with his ministerial counterparts in Australia and Singapore to establish a coordinated regional approach, and part of that was to bring “more powerful” unified engagement with global social media companies.