When the assistant treasurer started his National Press Club address on government reforms to stop financial scams, he made a point of acknowledging the heads of the banking lobby and the chief executive of Westpac.
To scam victims who hold the banks responsible for their personal losses, the Stephen Jones “shout out” on Wednesday was another sign of the perceived influence of the financial sector to avoid being forced to pay compensation.
The victims say that government plans ignore the central role that banks play in allowing fraudsters to set up accounts to steal and launder billions of dollars.
Kim Sawyer, a finance academic who has been advocating for reforms after she was personally scammed, says the government has let people down.
“It’s hard not to be pretty angry about it,” Sawyer says.
“Look, the way I see it, the government is really doing the bidding for the banks.”
The Labor government has outlined broad plans to force banks, telcos and social media platforms to compensate scam victims if their systems prove inadequate, as techniques used by fraudsters grow increasingly sophisticated.
The proposal is designed to combat authorised push-payment fraud, where a person is tricked into making a transaction.
But the government’s reforms have been described by consumer advocates as too slow and unworkable, with no clear avenue for out-of-pocket Australians to be reimbursed.
Crucially, the responsibility for scams is shared so widely it takes the focus away from the banks, which is in keeping with lobbying by the Anna Bligh-led Australian Banking Association (ABA).
Sawyer says the voices of scam victims and consumer advocates have been drowned out by the financial sector.
“The banks and ABA are a powerful lobby group,” Sawyer says.
“Every time we met a politician they had seen Anna Bligh last week. She has access that victims don’t have.”
In a statement to Guardian Australia, Jones says the government has worked closely with consumer groups to turn the tide on scam losses.
“Nobody gets a free pass here,” the assistant treasurer says.
“If banks fail to meet their obligations under the code, they will be forced to compensate impacted consumers. So will social media companies and so will telecommunications companies. They won’t be left off the hook.”
‘Honey pot’
The Labor plans, which it hopes to legislate before the next election, differ from the UK’s targeted policy of making banks reimburse scam victims, except in rare circumstances of gross negligence.
UK regulators oversee the role that other groups, including digital platforms, play in promoting scams through separate laws.
The banking sector responsibility lies in the operation of so-called mule accounts under its nose.
One scam victim, who lost more than $800,000 and asked not to be identified, says the banks need to be held to account – not catered to.
“The banks need to be working with each other to stop this.
“They didn’t do their due diligence and have shown no duty of care whatsoever.”
Concerned scam victims and consumer advocates claim the language coming out of the Australian government closely resembles arguments put forward by banking lobbyists.
For example, Jones has said the UK model of forcing banks to make mandatory reimbursements to out-of-pocket customers would create a “honey pot” for scammers, the same phrasing used by Bligh.
Part of the so-called honey-pot warning is based on an argument that scammers will get involved in transactions, claim they were defrauded and apply for reimbursements from the banks.
The mandatory UK rules don’t come into force until later this year, but some financial institutions have used the reimbursement model for years, including the British bank TSB.
A TSB spokesperson tells Guardian Australia it has maintained a refund rate of 97% since launching its guarantee in 2019.
“As a result of refunding innocent victims, we have also benefited from more informed conversations with customers to better understand how the scam took place and the tactics and platforms involved.”
TSB says the honey-pot warnings had not come to pass.
“No, this has not been our experience and we monitor each claim carefully to weed out and prevent any first party fraud. Banks will always have to adapt to the changing approach of fraudsters and be prepared for new tactics and approaches.
“Most importantly, through these new rules the UK will be much better protected from what can be devastating fraud losses.”
The spokesperson says more work needs to be done to stop fraud occurring in other sectors, such as social media companies.
An ABA spokesperson says any inference the association was influencing government language on scam reform was “ridiculous and laughable”.
“Honey pot is a term used across the world in the context of scams, including by consumer advocates here in Australia,” the spokesperson says.
“If Australia is serious about protecting people from scammers, we need every part of the scams chain to play their part. That includes banks, government, telcos and social media platforms.”
Mounting losses
Acknowledging the devastating impact scams continue to have on Australians, Jones noted in his press club address that losses have decreased, which he credited to government measures.
The ABA has made the same point, arguing that “Australia has seen one of the largest drops in scam losses” and that it is only through a collective effort across the economy that the “war against scammers” can be won.
Their message is clear: the current approach is working.
In 2023, Australians lost $2.74bn to scams, according to the competition regulator, a 13% decrease compared with 2022, but more than triple 2020 figures.
Meanwhile, the ABA points out that the UK has only recorded a 4% drop.
But the comparison masks the high number of people being scammed.
Australia has suffered far larger losses than the UK, making it easier to record a larger percentage drop. Given Australia has well under half the population of the United Kingdom – a comparison made by academic Peter Martin in The Conversation – the prevalence of local scams is alarming.
Sawyer claims the government has made Australia a target by not adopting a reimbursement model. That, Sawyer says, would incentivise banks to combat the problem.
“The scammers knew they would be up against victims rather than banks,” Sawyer says.
“They knew they could scam and launder and there would be no redress. That’s what has happened.”
Stephanie Tonkin, the chief executive of the Melbourne-based Consumer Action Law Centre, says it is difficult to understand why the government is “so loth” to use the UK’s reimbursement model.
The UK system is “far easier to legislate and work”, she says.
“They have far lower losses per household to scams than we have here in Australia,” Tonkin says.
“We are already the honey pot.”
