Scam victims left unprotected as banks deny liability

Dr Kim Sawyer writes that banks knew their systems were flawed but refused to act and victims of fraud were forced to pay the price.

ON MARCH 12, 2024, former Deputy Treasurer Stephen Jones gave one report about fraud.

Jones expressed what many scam victims express:

I think we need to add responsibility and accountability; There will be a connection between these two things.

…accountability must apply, but it must be where the responsibility lies.

In the same interview, Jones reflected on the banks’ failure to accept creditor approval.

“We were talking to them two years ago and said payee approval was OK… If you entered the wrong number because there wasn’t an alphanumeric match and you don’t know if you sent the money to Hans instead of Jacquelin. That’s a big mistake in their online application. They were very resistant to rolling out payee approval across the entire banking system, they’ve now agreed that it should be a core function.”

The minister noted what fraud victims have been saying for the past two years: Failure to provide creditor approval was a major flaw in banks’ online systems. Banks knew the importance of this. They knew what scam victims understood.

Authorized instant payment (APPLICATION) fraud was detected in Europe about a decade ago. APP scammers encourage bank customers to transfer money from their accounts to mule accounts for laundering purposes. There was a simple solution; Approval of the creditor, seeing the name of the creditor to whom the customer transfers his money in his accounts.

There was approval from the creditor reduced fraud It has been increased by 81 percent in the Netherlands and 35 percent in the United Kingdom, and became mandatory in the United Kingdom in March 2020. Recommended by the Australian Competition and Consumer Commission (ACCC) in 2020 and 2022 and was recommended by the Australian Securities and Investments Commission (ASIC) as early as 2011.

But banks resisted. They failed to act in their customers’ best interests. They exposed customers to risk. Their failures led to hundreds of thousands of Australians being defrauded and billions of dollars lost.

When banks’ total profits exceed $40 billion, creditor confirmation is now available to all banks at a cost of only $100 million. But it could have been done five years ago. Banks were forcing their customers to access the internet even though they knew there was a malfunction in their systems. Banks were exposing their customers to unnecessary risks.

Let’s get back to the lyrics “Responsibility should be valid, but it should be where the responsibility lies.”. A recall occurs when an automaker discovers a defect in one of its models. They are aware that they are responsible. Honda in 2024 Recalled 16,000 vehicles Claiming a possible malfunction in the vehicle’s electronic power steering system. They realized that they were wrong. He who is responsible is responsible; The person responsible is the one who must pay.

If banks are responsible for a fault, they are liable, and if so, they must compensate victims for their losses. However, they do not pay compensation to the victims; They are allowed to deny responsibility for a mistake that they know was a mistake, that the ACCC knows was a mistake, that the Government know was a mistake. They are also allowed to deny responsibility for not monitoring money laundering from mule accounts.

What many do not appreciate is that the fraud problem that has emerged in Australia over the last five years, British Post Office scandal. The Post Office was responsible for the faulty installation. horizon systemboth contractually and through their malicious actions.

2019 Supreme Court decision states that Horizon IT system “errors, mistakes and flaws” This caused financial deficits for which sub-postmasters were wrongly blamed. The court ruled that the Post Office placed unreasonable responsibility on deputy postmasters, ruined lives and covered up the system’s problems. The post office was at fault and deemed liable.

The fraud problem is similar, but most people don’t understand it. There was a bug in the banks’ systems, they were aware of the bug, they knew it would mean many customers would lose money as in Europe before creditor approval, and they knew customers would not be able to reduce risk, but they resisted introducing creditor approval at minimal cost to banks by 2025. And the Government allowed them.

The government allowed banks to deny liability and place responsibility on victims. The government knew the mistake in 2022 but surrendered Australian Banking Association Instead of listening to ACCC advice and best practice overseas in 2020 and 2022. The government failed to regulate what needed to be regulated.

This failure justifies a second royal commission.

In his delivery final report Royal Commissioner for Justice in April 2019 Kenneth Hayne he observed:

“Throughout the Commission’s work, I have followed closely and attached great importance to the Commission’s conduct of a public inquiry into the public disclosure of abuses and the vindication of those affected by that disclosure.”

Justice Hayne observed that banks were the central artery of the economy. Everyone wants banks to be strong; Everyone also wants banks to protect their customers from unnecessary risks.

Victims of fraud are forced to pursue legal processes at great cost and risk to themselves, an unequal competition of the weak against the powerful. A royal commission is like a discovery process where abuses are exposed and not rewarded; where errors occur. The royal commission will be proof that the victims are not the only ones to blame.