ASIC releases new report, urging more vigilance against scams

ASIC is calling for all financial institutions to improve their approaches to handling scams after new ASIC analysis revealed that scam losses for major bank customers exceeded $550m last financial year and impacted more than 31,700 customers. 

In its latest report, ‘Scam Prevention, detection, and response by the four major banks’, ASIC has reviewed the scam prevention related activities that are being conducted by the four major Australian banks. The learnings from this report are applicable to the wider industry.  

ASIC Deputy Chair Sarah Court said, “combatting scams is a critical task for all of corporate Australia – financial institutions, telecommunication providers, digital platforms and other organisations need to work cohesively to stop scams at the source.” 

An exponential rise in scams 

The increase in scam activity over time has been driven by several structural factors. Two of these factors are the advances in technology that have improved a scammer’s ability to easily and cost-effectively target and contact scam victims; and the move towards digital financial services, which has made it quicker and easier to both send and receive scam payments.  

These structural factors, along with consumers’ increased digital adoption and isolation during the COVID-19 pandemic, have amplified the importance of effective scam management by all entities across the broader scam ecosystem. This includes, among others, financial institutions, telecommunications providers, and digital platforms. 

Scams are increasing in volume and sophistication, causing significant financial and other harm to Australian consumers, including the most vulnerable people in the community. Between 1 July 2021 and 30 June 2022, more than 31,700 customers of the four major banks collectively lost more than $558 million through scams. This was an increase of 49% in customers and 50% in financial losses compared to the previous 12-month period. During the same period, banks paid approximately $21 million in reimbursement and/or compensation payments to customers who fell victim to a scam. 

Key findings of the report 

Some of the key findings of the report are outlined below.  

• The overall approach to scams strategy and governance was highly variable and, overall, less mature than expected. Only one bank had a documented bank-wide scams strategy; two banks regularly reported customer experiences of scams and their outcomes to senior management; and only one bank had recently conducted an end-to-end review of its scam practices. 
• Banks had inconsistent and narrow approaches to determining liability. For example, none of the banks had a bank-wide approach to determining liability for scam losses, which meant that a scam victim might get a different outcome depending on which bank they are with and which department of their bank they dealt with when seeking financial reimbursement after falling victim to a scam.  
• Scam victims are not always well supported by their bank. For example, there were resourcing issues which meant that for some banks scam cases were not being resolved in a timely manner; process gaps and lack of clarity in processes that caused inconsistent and sometimes poor customer experiences; and gaps in how the banks identified and managed customers experiencing vulnerability.  
• There are gaps and inconsistencies in the abilities of the banks to detect and stop scam payments. For example, the ability to hold payments in real-time differed between banks and depended on the specific payment channel and network involved.  
• While there were examples of emerging good practice, overall there was a great deal of variability in the steps being undertaken by the banks to help prevent their customers from becoming the victim of a scam. For example, some banks were imposing more friction into the payments process than others; some banks had been more successful in working with telecommunications providers to implement measures to minimise misuse of their phone numbers and SMS ‘alpha tags’; and some banks had been quicker to adopt new technologies. 

ASIC expects scam prevention, detection and response activities to continue to develop and improve with time. You can read the full report at the ASIC website.