Australia has had success in fighting financial fraud by embracing a voluntary system in which banks agree to take steps to further protect their customers — a contrast from the U.K., where mandatory reimbursements from scam losses has fueled fraud, Chris Taylor, chief policy officer for the Australian Bankers Association, told attendees today at the American Bankers Association Annual Conference in Charlotte, North Carolina.
Australia, like the U.S., has struggled to rein in financial fraud in recent years. As lawmakers there explored options to mitigate the problem, Taylor said one thing the banking sector wanted to avoid was a system like in the U.K., where financial institutions are required to reimburse customers for fraud.
“It’s creating a honey pot problem for the U.K. where they’re actually a more attractive target for scammers,” Taylor said. “Since that regime was started in 2019, there’s actually been a 90% increase in the range of scams, and the instance of scams is four times more per capita in the U.K. than it is in Australia.”
Australian banks studied the scams they were seeing and learned that by the time they received the payment instruction from a customer, that customer had already fallen for the scam.
“It was clear to us that banks are not in the greatest position to actually have a full impact on their own,” Taylor said. “While there’s more that banks certainly need to do to harden their systems, they don’t have the agency over the upstream and the downstream components of how this scam chain actually operates, and it was clear to us that the best way to protect the customer is by preventing the scam from reaching them in the first place.”
Australia adopted a voluntary, industry-wide base set of practices for what banks would do to keep customers safe, incorporating features such as stronger customer confirmation and warning systems. During 2024, the first full year of implementation of the system, Australia experienced a 26% reduction in scam losses.
Taylor also emphasized that if such a system is going to be sustainable, then an “ecosystem” approach is needed where telecommunications companies, social media platforms and payment providers need to step up their own fraud prevention efforts.
“Banks need to do more, but so do telecos, and so do social media platforms, and so do new payment platforms — that really is at the heart of the ecosystem approach,” he said.
