ANZ, NAB chiefs oppose voluntary scam reimbursement code

Scam reimbursement scheme Australia NAB ANZ

The chief executives of ANZ and NAB have both declared they would oppose the introduction of a voluntary industry code, mooted by Financial Services Minister Stephen Jones yesterday, that would compel Australian banks to compensate victims of financial scams – similar to a scheme launched in the UK in 2019.

The world-first voluntary reimbursement scheme, known as the Contingent Reimbursement Model (CRM) Code, is set to be made mandatory for all payments providers in the UK from next year.

Under the scheme, customers identified as legitimate victims of fraud are paid back within five days of a scam being flagged.

The voluntary Code has so far been signed by ten banking groups and covers 90 per cent of relevant transactions.

Since the introduction of the Code, UK banks and payments providers have paid back around 66 per cent of scam losses to victims. Australian banks, by contrast, paid out between two and three per cent of scam losses.

Questioned separately during today’s House of Representatives Standing Committee review into Australia’s big four banks – which covered a number of separate issues of concern surrounding industry competition, growing hip pocket and interest rate pressures on households, physical branch closures, and disputes resolution processes – both Shayne Elliot, chief executive of ANZ, and Ross McEwan, chief executive of NAB, expressed their disagreement with the proposed introduction of a similar voluntary reimbursement code in Australia.

“No, I would not sign a code,” Elliot declared, responding to questioning by Labor MP Jerome Laxale.

Such a scheme, Elliot added, would not prevent scams and only “move the problem elsewhere”.

The costs of such a scheme, moreover, would ultimately be borne by all Australians through increased bank fees and a decrease in shareholder returns (which include the vast majority of superannuation fund holders), Elliot said.

With the same question posed to the NAB chief Ross McEwan later in the day, he responded:

“I happened to be up in the UK when they started working through [this Code] in 2018… I was actually against that scheme because I believed it wouldn’t stop the scams.”

He noted that the volume of scams in the UK has, in fact, increased since the introduction of the code, adding that, despite its intentions, it fails to tackle the “root cause” of the problem.

“We need to make sure that customers really do play their part in not clicking on links. We all have to hold hands together – customers, banks and telcos and the government.

“I would be cautious of that [Code] being the panacea of all things here in Australia, because I don’t think it will be.

“We can’t see what customers are doing when they make these payments – it doesn’t matter whether it’s a business customer or an individual customer. We’re not in the lounge or office when people are giving away their payment structures to somebody on the telephone.”

While he stressed that it is the banks’ responsibility to “detect as many” scams as possible, he believes there needs to be further discussion from all corners around the amount of friction that can be tolerated within the payments system to halt fraudsters.

“I would say we need to have that discussion as a committee but also as a nation about what payment friction goes back in to stop some of these [scam] payments. But that friction won’t stop a romance scam, it won’t stop an investment scam. It won’t stop a lot of scams.”

Speaking to ABC Radio Brisbane yesterday, Financial Services Minister Stephen Jones flagged the Albanese Government’s strong interest in introducing a scheme similar to UK’s voluntary reimbursement Code.

“When you look at what the UK does, we’ll probably look at something which travels in the same direction,” he said.

He added, however, that if an “individual themselves is liable and has been reckless… it would be not only unfair but probably dangerous to hold the bank accountable for that, because it means the scammers can just operate with impunity knowing the bank will always underwrite the loss.

“We’ve got to get those rules in place.”

Jone said the Government will look to have a deep consultation on the matter “between now and Christmas”.

Less than one hour to shut down a scam payment

Banks have a duty to combat scams, McEwan said. However, their time to act once a scam has been reported, he warned, is severely limited.

“Once you’ve gone beyond half an hour to an hour [without flagging a scam], the chances of you getting the money back [go down] exponentially,” said McEwan.

“It’s a pace that we have to work with.

“One of the things we needed to do, and did do, was introduce more people into our fraud and scams area to take the calls from customers to be able to immediately block and put it into the exchange.”

This, he added, has “taken away the time lag from a customer” from reporting scams to getting them shut down.

NAB’s anti-scams team consists of 450 members, equipped to attend to calls and emails 24/7 to ensure scams can be “blocked immediately”.

“That’s been a big one in terms of reducing stress levels for customers.”

This dedicated scam support team boost is among 64 separate anti-scam initiatives introduced by NAB. McEwan said the bank expects to complete all initiatives by May 2024.

Among the initiatives, he added, was the push to drive all payments from a NAB account onto the New Payments Platform (NPP), which enables account holder names to be checked and confirmed by payees before a payment is sent.

Both McEwan and NAB risk chief Shaun Dooley urged Australian banks to join and supply consistent intelligence to the Australian Financial Crimes Exchange (AFCX), which coordinates the collective efforts of Australia’s banking sector against financial crimes activity.

“We need as many banks as possible in the fraud reporting exchange, Dooley said. “The more reporting into (the AFCX’s Fraud Reporting Exchange (FRX), the more gets shared to organisations on a real-time basis, which gives us [as an industry] a better chance of intercepting and dealing with those issues.”

On SMS scams, and following NAB’s introduction of a policy to no longer embed links within text messages it sends to its customers, McEwan also urged the Australian Government to adopt Singapore’s SMS Sender ID Registry model.