The United Kingdom will force banks to reimburse scam victims under new legislation, and Australia could soon follow.
The Financial Services and Markets Act 2023, which was enacted last month, provides for a mandatory reimbursement program administered by the UK’s Payment Systems Regulator (PSR).
UK customers lost £500 million to scams last year, while Australians lost a record $3.1 billion.
Financial Services Minister Stephen Jones told ABC Radio Brisbane yesterday Australia would “probably look at something which travels in the same direction”.
PSR managing director Chris Hemsley said the laws encouraged the prevention and detection of scams.
“Once implemented, our changes will 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,” Mr Hemsley said.
“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.”
The Act applies to financial institutions, from major banks to small payment firms, and includes laws to ensure:
- reimbursement is split 50:50 between the sender and recipient institutions;
- consistent minimum standards, including reimbursement within five business days and extra protections for vulnerable customers; and
- clearer industry guidance, including on a maximum level of reimbursement and a claim excess.
Reports released in April by two national regulators laid bare the extent of scams in Australia and pressed the need for action.
The Australian Competition and Consumer Commission (ACCC), in Targeting Scams, reported Australians lost 80 per cent more to scams last year than in 2021.
Bank transfers were the most common way victims lost their money, with the ACCC recommending Australia investigate measures such as the UK’s Confirmation of Payee regulation.
The Australian Securities and Investments Commission (ASIC), in Scam prevention, detection and response by the four major banks, reported ANZ, Commonwealth, NAB and Westpac customers collectively lost more than $558 million through scams in the year to June 2022.
This was an increase of half on the previous financial year, though banks paid only $21 million in reimbursement and/or compensation to their scam victims, ASIC pointed out.
The Financial Services and Markets Act 2023 is due to be implemented in the UK early next year.