Years ago, as the CFO of a company, I received an email from the CEO, who was overseas at the time, requesting urgent payment for an approved invoice. However, I found the email suspicious because it deviated from his usual mode of communication. Unable to reach him immediately due to his overseas location, I enlisted the IT team to scrutinize the email, and they verified that although it appeared to be from the CEO, it was not authentic.
Since the onset of the epidemic, as individuals increasingly turned to the internet and embraced digital transactions, financial scams have surged in frequency. Present-day fraudsters and con artists leverage advanced cutting-edge technologies, including artificial intelligence, to target a wider audience.
Before the pandemic, detecting fraud was easier. You would frequently receive emails or texts requesting money transfers to unfamiliar contacts, resembling the one I mentioned earlier supposedly from my CEO. Such messages often contained grammatical or spelling mistakes. Nowadays, scammers are becoming more proficient at crafting convincing texts with the aid of artificial intelligence.
As con games and fraudulent schemes evolve in complexity, it is imperative to reconsider the current approach to scam detection. Differentiating between legitimate and unauthorized transactions is increasingly challenging, prompting calls from numerous professionals and elected officials for banks to step up their efforts in combating scams.
TIME magazine featured a story about a Wells Fargo Bank customer in the USA who thought she had taken sufficient precautions to verify the legitimacy of a caller to her cell phone in November 2023. The caller, claiming to be from Wells Fargo, asserted knowledge of her identity and appeared to be calling from a number indicated on her phone as belonging to the bank. While she conversed with the caller, her sister simultaneously dialed the provided number provided to confirm its authenticity as Wells Fargo customer support.
The caller informed her that her account had been compromised, advising her to deposit $3,500 using the Zelle payment app to resolve the issue. Initially unaware of the deception, she sent the man $1,000. Then realizing her mistake, she promptly contacted Wells Fargo to report the incident. However, the bank initially refused to reimburse the $1,000 deducted from her account. According to US federal regulations, financial institutions are mandated to refund clients for “unauthorized” transactions, or money transfers not personally authorized by the clients. However, if consumers are deceived into authorizing the transfer, banks are not obligated to reimburse them. Wells Fargo only refunded the $1,000 after TIME intervened and contacted the bank (Semuels, 2024).
It is inherently difficult for banks to discern and prevent transactions approved by customers, especially as frustrated customers denied valid transactions may opt to switch to another bank. However, despite the availability of necessary technology, many banks worldwide have yet to adopt it. Security features can detect transactions made at unusual times or involving unusually large sums of money. Furthermore, technology exists to recognize common behaviors indicative of scam victims, like simultaneous logins to bank accounts and calls to customer support.
What is the Scenario in Australia?
The inquiry about whether banks refund money lost to scams in Australia does not have a simple answer. Like in many other nations, scams pose an increasing threat in Australia, leading to substantial financial losses for victims. However, unlike countries such as the UK, Australian banks are not legally obligated to reimburse scam victims. In Australia, banks are encouraged to adopt a voluntary code of practice for addressing scams, although this is not legally enforceable (Cybertrace, 2023).
Although Australia lacks a legal mandate for banks to compensate scam victims, some banks have established policies to reimburse customers affected by certain scams. It is crucial to inquire with your bank regarding any existing reimbursement policies and the criteria for eligibility for a refund.
Advocates and consumer groups in Australia have been urging the government to implement better safeguards for scam victims and to compel banks to provide compensation. The Australian Competition and Consumer Commission (ACCC) has long advocated for banks to reimburse customers who have fallen prey to scams (Kelly, 2023).
Responding to this pressure, the Australian Banking Association (ABA) announced on November 24, 2023, that Australian banks have united to launch a new Scam-Safe Accord aimed at offering a higher level of protection for customers and eradicating scammers in Australia. According to the ABA announcement, this Accord involves collaboration among Australia’s community-owned banks, building societies, credit unions, and commercial banks, outlining a comprehensive set of anti-scam measures across the entire industry.
“This Scam-Safe Accord is a new offensive in the war on scams. It reflects the banking sector’s unwavering commitment to safeguarding every Australian. It outlines the actions every bank will take to protect Australian consumers and small businesses and to harden the system against scams,” said ABA CEO Anna Bligh.
At the core of the Scam-Safe Accord lies a $100 million investment by the industry to implement a new confirmation of payee system across all Australian banks. This system aims to decrease scams by enabling individuals to verify that they are transferring money to the intended recipient. With15.4 billion transactions amounting to $2.5 trillion annually within the banking sector, developing and implementing an industry-wide confirmation of payee system is a significant endeavor. The design process for the new system will commence immediately, with construction and deployment scheduled for completion throughout 2024 and 2025.
“Recent data from banks shows that $600 million in stolen funds been returned to customers over the last year. To keep up this effort it is critical that government, banks, telcos, social media and crypto platforms work together as part of an eco-system to stay one step ahead of sophisticated criminal gangs,” Anna Bligh said.
While banks have pledged to implement enhanced protections in their systems, customers should anticipate receiving more warnings and encountering delays when making payments to new recipients or increasing payment limits. To combat account misuse stemming from identity fraud, all banks will enhance their technology and controls, with major banks introducing biometric checks as unique identification measures during new account openings.
Furthermore, the Scam-Safe Accord encompasses a significant expansion of intelligence sharing throughout the sector, with all banks committed to acting on scam intelligence from the Australian Financial Crimes Exchange by mid-2024 and participating in the Fraud Reporting Exchange. This initiative ensures swift dissemination of crucial information across the banking sector regarding scam transactions, thereby improving the likelihood of scam prevention and facilitating the recovery of stolen funds.
Key Scams You Need to Be Aware of
One of the most prevalent scams, to which Wells Fargo bank customer was a victim to, is the Imposter scam, in which the perpetrator poses as someone they are not, in order to defraud victims of their money. As in the Wells Fargo bank case, these con artists can “spoof” phone numbers to appear as though they are phoning from your bank or from someone you know.
Because data breaches have become more common in recent years, some con artists gain access to vast amounts of their targets’ personal data. The Identity Theft Resource Centre in the USA estimates that in 2023 there were 3,205 publicly disclosed data breaches that affected around 353 million people. That represents a 72% rise from the previous peak in 2021(Semuels, 2024).
Here are some of the most common scam types that people fall victim to according to the Australian governments ‘scamwatch’ website (ACCC, 2023).
Impersonation Scams
Scammers deceive you into thinking they are from trusted organisations such as the police, government, banks, and well-known businesses. They can even pretend to be your friend or family member. Scammers fish for information about you by sending phishing emails or messages. These are designed to steal your information. They try and convince you to give them your personal information by pretending they are from an official organisation or someone you know and trust.
Scammers use technology to make their calls or messages appear to come from a legitimate phone number. They can make text messages appear in the same conversation thread as genuine messages from an organisation.
Investment Scams
Scammers use convincing marketing and new technology to make their investment sound too good to miss. They promise you big payouts with little or no risk. They often use pressure tactics to get you to act fast, so they can steal your money.
Jobs and Employment Scams
Scammers offer jobs that pay well with little effort. They pretend to be hiring on behalf of high-profile companies and online shopping platforms. Sometimes, the job they list does not even exist. Scammers also impersonate well-known recruitment agencies. Their goal is to steal your money and personal information. They may ask you to pay money up front to be able to work for them.
Products and Services Scams
Scammers pose as buyers or sellers to steal your money. They set up fake websites or profiles on legitimate retailer sites offering products or services at prices that are too good to be true. They post fake ads and fake reviews. They may use stolen logos, a dot.com.au domain name and stolen Australian Business Number (ABN). These scams are hard to spot.
Scammers also pose as businesses that you know and trust to send you fake bills. They can even change details on legitimate invoices so that customers end up paying the scammer instead of you.
Romance Scams
Scammers use the promise of love, dating, or friendship to get your money. They go to great lengths to convince you the relationship is real and manipulate you to give them money.
Scammers find you on social media, dating or gaming apps and websites. They might also text or email you. They hide behind fake profiles and identities, sometimes of famous people. Once you trust them, they will have an ‘emergency’ and ask for your help. This will often be requests for money or other products.
Threats and Extortion Scams
Scammers pretend to be from a trusted organisation and claim you need to pay money or something bad will happen. They may threaten you with arrest, deportation, or even physical harm, if you don’t agree to pay them immediately.
They can also blackmail you by threatening to share naked pictures or videos you have sent them unless you send them money.
Unexpected Money Scams
Scammers try to convince you that you are owed or entitled to, money or winnings that you did not expect to receive. The scammer asks you to pay a fee or to give your banking or identity details before you can collect the money or winnings. Unfortunately, there is no free money.
Summary
In essence, if you notice any unfamiliar transactions on your account, promptly notify your bank, particularly if it involves unrecognized payments or discrepancies in debit card charges. Request an explanation and inquire about the possibility of a refund. Should you find the bank’s response unsatisfactory, lodge a complaint with them, and refer to their website for guidance on the process.
If eight weeks pass without resolution or if the bank issues a final response letter, escalate the matter to the Financial Ombudsman in your jurisdiction. The ombudsman can intervene if they determine unfair treatment, possessing the authority to rectify the situation.
Lastly, exercise caution, refrain from answering calls purportedly from your bank.
References
ACCC (2023), The Little Black Book of Scams, National Anti-Scam Centre, Australian Competition and Consumer Commission, pp 1-23.
Cybertrace (2023), “Do Banks Refund Scammed Money in Australia and the UK?”, Cybertrace,
March 8. https://www.cybertrace.com.au/do-banks-refund-scammed-money/
Kelly, Cait (2023), “Australian banks should reimburse scam victims, ACCC and consumer advocates say”, The Guardian, 2 Feb 2023
Semuels, Alana (2024), “Banks Aren’t Doing Enough to Protect Customers from Scams”, TIME Magazine, March 18. https://time.com/6952817/financial-scams-banks/