Receiving banks in focus in AFCA scam reforms

AFCA is pushing on with measures that will enable it to consider the role of receiving banks in assessing liability for scams.

AFCA yesterday published draft rules that “provide AFCA with jurisdiction to deal with complaints involving a receiving bank and/or mule account in scam complaints.”

This is required by recent amendments to the conditions of its Authorisation.

“Where a person has been a victim of a scam, the person may find themselves in dispute with a Financial Firm that has unintentionally facilitated the scam, for example, by transferring funds from the victim’s account to the scammer’s account” AFCA explained in a short consultation paper on draft rule changes.

‘If a scam related dispute with a Financial Firm is escalated to AFCA, our current Rules and jurisdiction limit us to only being able to deal with the Financial Firm of which the scam victim is a customer, and not another Financial Firm that has been used by the scammer to facilitate the scam, such as a receiving bank.

“The Government’s Authorisation instrument and the resulting proposed changes to our Rules aim to overcome this limitation for complaints about banks concerning scams.”

Scam losses in Australia are conservatively estimated to be at least $2 billion annually.

Many banks, including all major banks, are making progress in disrupting scams (at the point of payment), with scams averted by the major banks combined in the last year likely to be well in excess of $500 million.

To date, however, in virtually all scam cases considered by AFCA and resulting in a published Ombudsman determination, AFCA has found in favour of the paying bank and not the complainant.

Extending AFCA’s power to analyse the role of the receiving bank may well result in this balance of determinations swinging in favour of scam victims – and greatly escalating the level of scam losses borne by the industry.

Receiving banks in focus in AFCA scam reforms

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