More pressure is being heaped on New Zealand’s banks to do better at protecting customers from scams, with a Parliamentary committee recommending a voluntary compensation scheme for victims be investigated and the introduction of name and account number checking.
Parliament’s Finance and Expenditure Committee this week made three recommendations it said would have a positive impact on consumer protection, as banks and consumers grapple with a rising tide of financial frauds.
The Committee said NZ banks had some protections in place, but scammers were still actively targeting New Zealanders.
It said banks’ processes in New Zealand could be strengthened by adopting similar systems in use in the United Kingdom such as name and account number checking, or confirmation of payee.
The Finance and Expenditure Committee said Lloyds Banking Group, a large UK bank, said confirmation of payee had helped to reduce bank transfer scams by 31% within the first couple of months of its introduction in 2020.
It said banks could check the name provided by the person making a payment against the actual name associated with the account they are paying money into, and if the names don’t match, or the information is not available for the recipient account, a notification is sent to the consumer.
“This allows the consumer to make a more informed decision about whether to proceed with the payment.”
All of NZ’s big four banks support the industry setting up confirmation of payee.
ANZ, New Zealand’s largest bank, said on Friday that it supported account cross-checking. It said it was working closely with the industry “and other relevant parties on this along with other anti-scam initiatives that could help protect New Zealanders from the increasing frequency and sophistication of scam and fraud attempts”.
The bank previously said confirmation of payee added another layer in the net to catch potential scams, but it had not stopped scams given how hard scammers work to include banks’ processes and security checks into the scam.
The UK introduced confirmation of payee in 2020.
Payments NZ, the bank-owned payments operator, was in discussions with banks about introducing name and account matching, ASB boss Vittoria Shortt said this month.
Personal finance commentator Janine Starks has said New Zealand banks’ refusal to introduce name and account number checking has left New Zealanders vulnerable to being ripped off, pointing to examples where payments were made to scammer accounts that may have been caught if banks matched account details.
For example, in a high-profile case where scammers pretended they worked for Citibank and offered fake term deposits, payments were made to an ASB account in New Zealand.
Massey University Associate Professor Claire Matthews said name and account matching was something NZ banks should bring in.
"I think that is something that banks should be doing, and so we should be encouraging it. But I'm not sure that it's going to have a long-term benefit. I think it might be a short-term answer, because I suspect that the scammers will someday find a way of getting around that."
Get scammed, get money back?
The Committee also recommended the Government “urge” the New Zealand Banking Association (NZBA) to update its Code of Banking Practice to “offer further measures that help protect consumers from scams and fraudulent activity”.
Its third recommendation was that a voluntary compensation or reimbursement scheme be investigated, similar to the one operating in the UK.
In June the UK’s payments regulator announced banks would be required to reimburse fraud victims tricked into making payments to scammers under new rules to come into effect in 2024.
The UK payments regulator said the changes would deliver a major shift from the status quo, “giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place”.
“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”
It said this “step change” would mean the UK would be at the forefront of the fight against authorised push payments fraud globally.
Banking commentator Matthews, however, was not in favour of such a move. She said it suggested NZ banks were doing the bare minimum, and said "I don't think that's fair".
She said banks have substantial teams working on scams and frauds, technology was being used and the reality was "banks don't want [scams] to happen".
"They also don't want their customers to be caught, because from a purely selfish perspective, it means that they lose money because their customer no longer has that money in their account. And the bank no longer has that money in a bank account. So from a purely selfish perspective, they don't want customers to lose money, they don't want customers to be harmed. There's a reputational risk for them as well."
National Party commerce spokesperson and member of the Finance and Expenditure Committee, Andrew Bayly, said he was very concerned about New Zealanders losing money to financial scams because they were "growing quite significantly".
Data from the Banking Ombudsman, Nicola Sladden, conservatively estimated New Zealanders were losing almost $200m annually. The most recent national crime survey found for the first time fraud and deception crimes were the most common crime perpetrated against New Zealanders, but NZ Police said most victims didn't report these crimes. Government cybersecurity information service Computer Emergency Response Team (Cert NZ) reported that financial losses as a result of cyber crimes rose a staggering 66% in the first quarter of 2023.
Bayly said banks should be paying customers back for authorised payments scams.
Bayly also said the Financial Markets Authority (FMA), the markets watchdog, should be the lead Government agency in tackling financial frauds.
Currently a number of agencies are involved in protecting New Zealanders from scammers including the Department of Internal Affairs, NZ Police, Cert NZ, the Commerce Commission and the FMA.
At the Financial Services Council's annual conference this week, the FMA's Executive Director of Regulatory Delivery, Clare Bolingford, said it was looking at anti-scam measures introduced in other jurisdictions such as Australia’s recently launched National Anti-Scam Centre.
All four of NZ's big banks said they supported funding and staffing an anti-scam centre, which would bring together regulators, banks and specialists to help combat financial frauds.
Singapore's anti scam hub has been credited with returning an estimated $200 million to victims since it was launched in 2019.
None of the major banks nor the NZBA had responded to requests for comment at the time of publication. Commerce and Consumer Affairs Minister Duncan Webb has also been contacted for comment.
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