Banks need to do better in NZ's financial cybercrime avalanche

“In New Zealand at least $200 million is lost to scams each year.

“We know there is widespread underreporting, so that number is likely to be much higher. Many of these losses are not covered by banks,” said Jon Duffy Consumer chief executive.

Under the New Zealand Banking Association Code of Practice, banks only have to refund customers who fall victim to unauthorised payment fraud. We think this is unfair in many cases.

“If your wallet is stolen and someone goes on a shopping spree using your credit card, this is classed as an unauthorised transaction – and your bank should reimburse you.

“However, as scams become increasingly sophisticated, people are at higher risk of being lured into making authorised payments by professional scammers.

“Of course, people must take their banking safety seriously and should do all they can to avoid falling victim to scams.

“But to suggest that with so many resources at their disposal, the banks should have no responsibility to protect and refund their customers when they are scammed into authorising a transaction feels wrong,” said Duffy.

Banks are often the last line of defence between professional scammers and innocent victims.

“We know scams are getting more sophisticated, which means New Zealanders are increasingly at risk.

“There’s no question that banks must do better.”

A cyberscam story

In August last year Doug lost $60,000 to cybercriminals. As Doug had been dealing with the Inland Revenue (IR), an email from them did not arouse suspicion.

The email contained a link which prompted Doug to reset his myIR password and click through to his bank website to receive a tax refund.

The bank website Doug landed on looked just like his bank website and he entered his log-in details. However, it was a fake website and the cybercriminals extracted $60,000 from his account.

Doug reported the incident to his bank, who told him he had breached the terms and conditions of his account by giving the scammer the information needed to access his internet banking. His bank said it was not obliged to reimburse his loss.

Doug brought his case to the Banking Ombudsman, who judged he acted reasonably. Doug was reimbursed the $60,000 plus interest.

“Doug was fortunate to have the knowledge to navigate the system and enlist the help of the Banking Ombudsman, not everyone has that knowledge or capability," said Duffy.

The case for change

“Our consumer protection ecosystem is massively out of step with many jurisdictions we like to compare ourselves to.”

Most big banks in the UK are signatories to a voluntary code where they typically refund scam victims for their losses.

Duffy would like to see a similar stance taken by the banks in New Zealand.

“We expect banks here to argue they should not be liable for their customers' perceived mistakes – but the way we see it, right now customers are carrying pretty much all the risk in the fight against scams.

“We don't accept the view that banks taking more responsibility will mean customers suddenly become careless with their bank details.

“Getting scammed is extremely stressful, and most people do everything they can to avoid becoming a scam victim.”

In Australia, banks have teamed up to develop a platform, enabling them to act more quickly to freeze fraudulent activity.

Recently the Australian National Anti-Scam Centre has announced an investment scam task force – which brings together representatives from the banks, telecommunications, and digital platforms to disrupt criminal activities.

“We want to see similar action here – there has to be fairer outcomes for consumers in New Zealand.”

We would like to see better and fairer outcomes for consumers:

• Scam prevention and ecosystem approach – like Australia’s recently announced task force, this would enable intelligence sharing across relevant industries, including banking, to detect and prevent scams.
• Banks reimbursing losses for authorised payment scams – banks should be liable for losses arising from authorised payment scams – as long as the consumer hasn’t actively contributed to, or increased the impact of, the scam.