'Just goes to show how behind we are': NZ banks to bring in name and account number checking, remove links from texts and work together to freeze mule accounts to combat rampant scams

New Zealand’s banking industry has bowed to pressure from critics of its slow response to rampant scams, announcing it will introduce name and account number checking and take action to freeze mule accounts used to siphon money scammed from customers.

The New Zealand Banking Association (NZBA), the lobby group for NZ banks, said it would "investigate” real-time information sharing on scams, more “consistent and timely” outcomes for scammed customers and said it supported a National Anti-Scam Centre, similar to those already in operation in Australia and Singapore.

Banks would also remove all web links from texts to customers.

New Zealand’s banks have been under sustained pressure from scam victims and industry commentators for failing to plug systemic gaps in their systems, including the ability for people to check that the names and account numbers they make payments to match.

The United Kingdom introduced name and account number checking, or confirmation of payee, in 2020.

Critics have said NZ banks refusal to plug these gaps meant NZ was seen as a soft touch by scammers, who used sophisticated schemes including mock websites and detailed investment pitches to trick people into paying out sometimes hundreds of thousands of dollars.

Recently a Parliamentary committee recommended NZ banks adopt confirmation of payee, ratcheting up the pressure on the industry.

One devastating scam has seen New Zealanders make payments to NZ mule bank accounts which were meant to be Citibank accounts, for faked term deposit investments.

Auckland real estate agent Carla O'Neill, who fell victim to the Citibank term deposit scam, said it was about time some action had been taken.

"It has been a long time coming."

Banks should be forced to pay victims back

Personal finance commentator Janine Starks said these were welcome changes by the industry, however, one press release "doesn’t catch-up years of underinvestment so there’s plenty to answer still (while saying thank you and congrats to them)".

She wanted to see the introduction of a similar model to the UK where banks are being forced to take liability for scam losses even where payments are authorised, to incentivise banks to shore-up fraud protections.

Starks said the "raft of measures" announced on Friday by the NZBA acknowledged the banks' failures, but there was still a line in the sand that banks continued to only repay unauthorised frauds. She said banks' decisions and technology drives authorised payment frauds.

Removing links from text was in "the basic and urgent pile", but banks should stop texting phone numbers too, and instead tell customers to ring the usual bank phone number.

"Plus they must always say if you didn't request this, call us immediately."

Consumer NZ Chief Executive Jon Duffy agreed that anyone who fell victim to a scam that could have been prevented by confirmation of payee technology from now on should be reimbursed by the banks.

He said NZ banks had effectively gone on record to say they needed to build confirmation of payee to protect consumers, "and they haven't up to this point".

Duffy said the banks' decision to introduce confirmation of payee "materially changed" the situation, "now that they've admitted they have a role to play". Previously banks had pushed the responsibility onto customers, he said.

Duffy said he was concerned the banking sector wouldn't deliver confirmation of payee in a timely enough manner, because it had taken an "extraordinarily" long time for banks to say they would bring it in.

"There's long been evidence from overseas jurisdictions that [confirmation of payee] materially reduces authorised payment scams, but it has not been implemented in New Zealand."

The decision to remove links from text messages sent by banks was "just basic cyber hygiene" and shouldn't have been happening in the first place, Duffy said.

"It just goes to show how behind we are."

What the banks said

NZBA Chief Executive Roger Beaumont said the commitment to these initiatives to fight fraud and scams would lead the way for a significant, co-ordinated, multi-sector approach to protecting New Zealanders.

He said work was underway to look at options for a confirmation of payee service.

“We will need to investigate privacy considerations and banks’ ability to disclose account names to third parties, as well as technical issues. Banks will work with Payments NZ, which governs the payments system, to help make this a reality.”

Payments NZ is owned by the banks.

Beaumont said banks would investigate the ability to freeze mule accounts, used by fraudsters to transfer stolen funds. 

“Sharing information as scams are unfolding is important and banks will also work with the relevant authorities to investigate how they could share scam-related information in real time, while maintaining legal obligations around privacy and confidentiality.”

In June NZ Police said it had arrested an Auckland man who was allegedly a money mule.

And changes may be coming to the Banking Ombudsman Scheme. It too had been criticised for failing to respond to the trend of authorised payment scams, where people are tricked into making payments to scammers. The current Banking Code of Practice allowed banks to reimburse those who did not authorise payments to scammers.

However, some banks have paid out partial settlements to people who fell victim to authorised payment scams.

Beaumont said the industry would work closely with the Banking Ombudsman to support a more consistent and timely response to customers who have been scammed.

“Banks will also increase resources available for initiatives to raise public awareness of scams and how to avoid them. Earlier this year the banking industry rolled out a ‘Take a sec to check’ advertising campaign to encourage people to be alert to scams. Banks also funded a television documentary commissioned by the Banking Ombudsman called ‘You’ve Been Scammed By Nigel Latta’. Banks also routinely run their own scam awareness initiatives for customers. Banks will be building on that work.”

ASB, which was the bank at the centre of the Citibank scam with ASB accounts used as mule accounts, said it believed much more could be achieved from a joined-up national approach, with banks working more closely together, alongside government, telcos and other private sector companies.

Its Chief Executive Vittoria Shortt said it had seen this approach work successfully overseas, for example the Singapore Anti-Scam Centre.

“This is an incredibly complex problem which requires equally complex solutions, and a multi-pronged approach to fight this issue on multiple fronts. The programme of work we’ve announced today is an important step towards the national capability that New Zealanders need.”