Australia’s financial watchdog will receive new investigative powers to scrutinise the actions of banks on the receiving end of scam transactions.
Announced Tuesday, the new ministerial direction from Assistant Treasurer Stephen Jones will enable the Australian Financial Complaints Authority (AFCA) to “investigate culpability” of the receiving bank on the behalf of scam victims, bolstering the watchdog’s ability to address compensation claims.
To date, when a scam victim sought reimbursement or raised a complaint with AFCA, the authority could only consider the actions of the bank which had a direct customer relationship with the victim.
While AFCA could investigate the ‘sending bank’, and in some cases demand compensation, it has historically lacked the ability to trace the actions of the bank where the proceeds of the scam were transferred to.
The watchdog welcomed the expansion of its powers, with AFCA chief ombudsman David Locke stating the watchdog will “work with industry and consumer groups over coming months” to enact the change.
“This authorisation condition change means that in the future, the actions of receiving banks can be considered as part of the full chain of events in a scam,” said Locke.
Consumer Action Law Centre chief executive Stephanie Tonkin meanwhile deemed the change a “hard fought for win for future scam victims”.
“It stands to reason that the receiving bank is a key link in the criminal chain and up to now AFCA hasn’t been able to investigate its culpability or provide related redress to victims,” said Tonkin.
“With these important changes, I am hopeful that future victims will have a better chance to get the compensation they deserve.”
AFCA’s new powers will take effect in 12 months’ time.
Scam losses down, but the job’s not done
The announcement was coupled with National Anti-Scam Centre (NASC) findings that scam losses in Australia fell by 25.9 per cent last year.
NASC observed a total $2.03 billion in reported scam losses for the year, compared to $2.74 billion for 2023, while Australians made a lesser 494,732 scam reports to government agencies compared to the 601,803 in 2023.
Alongside Communications Minister Michelle Rowland, Jones said “while it is pleasing that losses have fallen, this is not job done”.
“Losses remain too high, and every dollar lost by a consumer is a dollar too many,” the ministers said.
In late 2025, the government is expected to mandate that telecommunications providers participate in an SMS anti-scams register, while a newly-passed Scams Prevention Framework Bill 2025 will require designated entities in banking, telecommunications and social media to actively detect and prevent attempted scams.
UK maintains the benchmark
In October 2024, the UK’s Payment Systems Regulator (PSR) introduced new measures for banks to reimburse scam victims within five business days of making a claim.
While the reimbursement measures don’t apply in cases of a scam victim being grossly negligent, the PSR notes “over 99 per cent of claims by volume” are covered by the new rules.
Meanwhile, the Australian government has faced criticism for failing to introduce mandatory compensation for victims in its newly passed scam reforms.
Jason Murrell, co-founder of cybersecurity advocacy organisation the Australian Cyber Network, told Information Age he expected more from the AFCA changes given the UK’s approach to compensation.
“This isn’t meaningful reform, it’s a weak half step,” said Murrell.
“If the UK can enforce mandatory reimbursements within five days, why are Australian banks still operating on a ‘best effort’ approach?
“In 12 months, we’ll be asking the same questions, with victims still out of pocket and banks still shrugging off accountability.”
Meanwhile, according to the Australian Securities and Investments Commission (ASIC), Australia’s ‘Big Four’ banks (Westpac, NAB, Commonwealth and ANZ) paid about $21 million in compensation to scam victims during financial year 2021-22, with reimbursement rates that ranged between only two and five per cent.
“Australia’s big four banks are among the most well-capitalised in the world, they post record breaking profits year after year, yet they continue to do the bare minimum when it comes to scam victims,” said Murrell.
“There’s no excuse, just a lack of enforcement and political will.”
Speaking with Information Age, Reece Corbett-Wilkins from law firm Clyde & Co said while AFCA’s new powers are “arguably a good thing” and may help broaden AFCA’s investigative reach, banks need to demonstrate learnings from AFCA’s adjudicative outcomes.
“Ultimately, what we want to see is improvements being driven into the banking system through the fact finding and adjudicative outcome that comes with an AFCA investigation,” said Corbett-Wilkins.
