Banks Take Action After Scammers Target Louis with $109k Loss

Louis May lost his $109,000 first home deposit to scammers in July last year. The scam started with an email from his conveyancer requesting property settlement, including account details and a fake PEXA form. Despite making two payments, he received a message from the bank two days later asking for settlement funds. The banking sector is now introducing a system called 'Confirmation of Payee' to combat such scams. The system alerts customers when a payment recipient's name doesn't match other account details, aiming to reduce scam losses. Major banks will implement the system in July, with all other deposit-taking institutions following by year-end.

While seen as a positive step, consumer advocates criticize the design of Confirmation of Payee, suggesting it places liability on customers for scams. Louis May's case highlights the need for such technology, as he lost his deposit despite receiving warnings during the transaction. The Australian Financial Complaints Authority found the bank's warnings to be sufficient and ruled out compensation.

The new system activates when a customer makes a first-time payment using a BSB and account number, checking for matching recipient details. If details don't match, a warning is shown, leaving the decision to proceed with the customer. The approach has raised concerns among victim advocates, who believe it puts the onus on customers to detect scams.

Australia's efforts to combat scams were discussed at a global roundtable, where the country's approach was compared to the UK's model. The UK's Confirmation of Payee system, introduced in 2020, holds banks liable for most scam losses up to a certain amount, promoting collaboration and reducing fraud. Consumer advocates in Australia suggest adopting a similar model to make banks more accountable for scam losses.

The lack of payee verification in the banking system has been described as a fundamental flaw that has fueled a billion-dollar scam industry. The inclusion of biometric checks for new bank accounts is a step forward, but experts warn it may not address all scam-related issues. Banks are urged to enhance intelligence sharing and collaborate with other sectors to combat evolving scam tactics.

Confirmation of Payee is part of the 'Scam-Safe Accord' signed by banks in 2023 to address rising scam losses. While progress has been made in implementing various safeguards, the impact of scams, such as Louis May's loss, continues to affect individuals and highlight the need for stronger consumer protections.

According to the source: Australian Broadcasting Corporation.