ASIC report reveals big four bank failing to prevent and respond to scams

In May 2022, ASIC commenced a review of scam prevention and detection responses of Australia’s big four banks. Unsurprisingly, ASIC found that scams are becoming more common and more sophisticated. What may, however, be surprising to many is that very few scams are detected by the banks, and only a tiny percentage of customers are reimbursed for their losses. In this blog, we review the primary findings of the investigation and explore your options if you’ve been a victim of a scam.

“Scam prevention, detection and response by the four major banks” – ASIC report released April 2023

ASIC released the report of its investigation into the big four banks (ANZ, NAB, CBA and Westpac) and their response to the increasing volume of scams defrauding customers out of thousands of dollars.

The report reveals that banks are failing to prevent scams and compensate their customers who fall through the cracks of any scam detection systems in place.

ASIC’s report found that only around 13% of scams are detected by the big four banks, and just 2-5% of losses are refunded to customers. If a customer is refunded after being scammed, on average, the customer only recovers about 36% of their loss.

Overall, ASIC’s review revealed that there are inconsistent approaches to scams from the big four banks and even inconsistent approaches adopted within the different departments of each bank.

What to do if you are the victim of a financial scam

If you have been the victim of a scam and your bank has failed to either recover the money you lost or has refused to refund you or compensate you for your losses, you can lodge a complaint through your bank’s Internal Dispute Resolution (IDR) complaints process.

Unsurprisingly, ASIC’s review revealed that customers who lodged an IDR complaint with their bank were more likely to receive compensation compared to customers who did not (with around 37% of IDR complaints for scams resulting in some form of refund or compensation).

If your bank rejects your IDR complaint or otherwise refuses to compensate you for your loss, you can lodge a complaint with the industry Ombudsman – the Australian Financial Complaints Authority (AFCA).

ASIC’s review found that 68% of customers who escalated their complaints to AFCA received some form of reimbursement or compensation from their bank.

When might a bank compensate you after a scam?

There are some circumstances where a bank will be liable to compensate a scammed customer, as identified by ASIC.

Under current Australian law, you may be entitled to compensation from your bank if one or more of the below applies to your circumstances.

1. The bank breaches the ePayments Code – which only applies to unauthorised transactions (which most scams are not).
2. The bank breaches its contractual obligations with the customer.
3. The bank fails to act with due care and skill, as required by s 12ED of the ASIC Act.
4. The bank fails to do all things necessary to ensure that financial services are provided efficiently, honestly and fairly, as required by s 912A of the Corporations Act.
5. AFCA considers a bank’s conduct is unfair in all the circumstances, having regard to legal principles, applicable industry codes or guidance, good industry practice and previous relevant AFCA decisions.

ASIC’s report identified the below scenarios and examples which may enliven liability from a bank to compensate a scammed customer.

• The bank fails to warn a customer that it does not check account names with BSB and account numbers when making a transaction.
• The bank fails to exercise due care for a customer experiencing vulnerability (such as financial hardship or disability).
• The bank fails or delays in making reasonable enquiries where it knew of facts that put it on notice a customer was possibly being defrauded.
• The bank made errors or delayed in recalling funds after it became aware a scam had occurred.
• The bank allows a customer to transact on an account which the bank preciously applied an alert or red flag to.

Unfortunately, not every customer will get refunded or compensated by a bank if they are a victim of a scam, and proving that their circumstances fall within some of the scenarios identified by ASIC can be difficult.

It’s clear that there is a dire need for action to tighten the regulations on banks to proactively prevent scams and protect their customers. We would like to see commitments from our banks to take responsibility for scams impacting customers and unify their approach to preventing and responding to scams in light of ASIC’s findings.

Get help to recover your losses from your bank if you are scammed

If you have been a victim of a financial scam, we can give you some free advice about possible claims against your bank or other financial service provider to recover and/or seek refunds or compensation for your losses.

Contacting Berrill & Watson

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📞 Anywhere else in Australia:  03 9448 8048

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