The federal government will expand its war on scams to tech firms, with new fines of up to $50 million for social media firms that don’t do enough to stamp out fake ads on their platforms, and new responsibilities to compensate victims.

The Labor government is in the process of developing a Scam Code Act, which will give it broad powers to apply minimum requirements on a range of companies, including telecommunications firms, banks and social media companies, as part of mandatory codes of conduct.

The codes will likely require all of these companies, including the social media firms, to be subject to an expanded federal regulator which will have the power to force them to compensate victims of scams through their platforms, and face fines for systemic failures to act on these issues, as the Sydney Morning Herald reported.

Tech companies will also likely be required to act quickly to stamp out these scams being posted on their platforms and notify regulators of their presence.

This will be done through the verification of advertisers on social media platforms, such as by checking their financial services licence, the government said.

Assistant Treasurer Stephen Jones compared social media platforms hosting scams to a pub allowing an individual to sell drugs within their premises and then not accepting responsibility for this.

“There clearly needs to be a significant uplift in standards and protections,” Jones said.

“Social media platforms are publishing anything from puppy scams to used car scams to high-end investment scams.

“They take money from advertisers to publish this content.

“They take no responsibility for the content of that material, and yet Australians are losing millions and millions of dollars because of this.”

Compensation for scam victims

The new scheme will also subject tech firms to the existing Australian Financial Complaints Authority, which currently regulates the banks and has the ability to order refunds for customers who have fallen victim to a scam.

If the Scam Code Act is passed, the Australian Competition and Consumer Commission will then begin to draft mandatory codes for each industry and individual companies.

It’s expected the code for banking will require these organisations to ensure their customers are warned if they are trying to make a transfer to an account that has previously raised an alert for a potential scam.

For telcos, a code may outline how they must stop the spread of scams over text messages.

All companies subject to these codes will also have to set up an internal dispute resolution process to deal with complaints from customers about scams.

Tech companies tried to get ahead of the mandatory regulations by creating their own Australian Online Scams Code earlier this year, which was a voluntary agreement to implement a range of measures, such as blocking, reporting and takedowns.

Signatories to this code include Meta, Google, Snap and TikTok.

But Jones said this voluntary code does not go far enough.

“I don’t believe they are in line with community expectations or government expectations,” he said.

“Social media platforms put their hands up and say, ‘this isn’t us, we can’t be responsible for this stuff’, but that is not good enough.”

The war on scams

Australian mining magnate Andrew Forrest has been in a years-long legal battle with Meta over scams ads on Facebook featuring deepfakes of him.

Forrest has pushed for a charge of criminal recklessness against Facebook, with a US district judge ruling in June that he can continue with a plan to sue Meta over the ads.

The federal government has been in an ongoing war against online scams for several years.

The most recent budget included $67.5 million over four years and $8.6 million for the development of the mandatory industry codes of conduct for scams.

Earlier this year the National Anti-Scam Centre announced that a “fusion cell” led by the ACCC and ASIC had already shut down hundreds of scam websites and blocked 113 attempted calls to scam phone numbers.