Newshub staff left heartbroken by closure proposal, Parliament repeals New Zealand's smokefree law and employees query leap year pay in the latest NZ Herald headlines. Video / NZ Herald
The banking watchdog has warned the new Government urgent measures are needed to counter the proliferation of complex scams and delaying new consumer protections will erode public trust in the banking sector.
Banking Ombudsman Nicola Sladden wants new laws introduced forcing digital platforms to take down fake websites which are being used as a front by scammers to dupe Kiwi victims out of their life savings.
Sladden has also told banks to significantly improve fraud detection systems. She is calling for a review of rules governing when banks should be forced to reimburse fraud victims, and wants the Financial Markets Authority to conduct a review of the Code of Banking Practice.
In a briefing to incoming Commerce and Consumer Affairs Minister Andrew Bayly, obtained by the Herald, Sladden said the increasing sophistication of scams and massive losses they caused were a great concern to her office.
“We are regularly contacted by scam victims who have suffered losses in excess of our financial limit of $350,000.”
She warned that consumers expected urgent action. Delays implementing new protective measures would “erode trust” in the banking system.
Sladden told the Herald the country urgently needed a dedicated, multi-agency anti-scam centre like that of Singapore’s to tackle the proliferation of fraud cases which now account for more than a fifth of complaints received by her office.
The centre would comprise banks, police, telecommunication companies, government agencies, consumer groups and digital platforms, and co-ordinate scam activity from detection, to prevention and return of lost funds.
“We need to turn up the heat on these criminals by establishing a centralised body to gather intelligence, share information and introduce disruptive counter-measures, such as taking down fake websites and freezing ‘mule’ accounts,” Sladden said.
It would also enable rapid responses to emerging scams, including alerting the public and providing a single source of authoritative information.
Consumer NZ chief executive Jon Duffy has called for better fraud detection measures and enhanced consumer protection from the banking sector.
Sladden’s forthright comments come a day after Consumer NZ hit out at the Banking Ombudsman scheme, calling for law changes to broaden the watchdog’s power and better protect consumers following a slew of high-profile decisions declining reimbursement to scam victims.
Consumer NZ said the scheme was constrained by a legal framework with “clear gaps”, which unfairly restricted bank liability, leaving victims vulnerable and powerless.
In response, Sladden said she could only work within the parameters of the rules governing her office. Further consumer protection would require voluntary buy-in from banks, or new regulations by Parliament.
Banking Ombudsman Nicola Sladden wants banks to significantly improve their fraud detection systems. Photo / File
“This measure is so vital because scammers often dupe people into believing they are sending money to, say, a holding account, when, in fact, they are sending it to a mule account – an account operated [sometimes] unwittingly by an innocent person – from where the funds quickly vanish.”
The new measures she had outlined would help prevent scams and put a “good dent in scammers’ arsenal of tricks”.
Sladden said she was frustrated at how slow digital platforms were to take down scam websites, like those purporting to compare term deposit rates, which had lured in dozens of New Zealanders last year who were tricked into losing life-changing sums of money.
Carla O'Neil lost $100,000 after clicking on a fake website comparing term deposit rates then being contacted by man posing as a Citibank financial adviser. Photo / Alex Burton
“We need regulations requiring them to do so as soon as alerted to the fact a website is a front for scam activity.”
Other urgent measures included:
*Banks making significant improvements to their fraud detection systems to keep pace with the complexity of scams.
*A review of rules governing reimbursement of fraud victims.
*Comprehensive, mandatory codes of practice needed for banks, telecommunication companies and digital platforms governing their responsibilities in preventing scams and respective liability.
While bank customers should protect personal information and be vigilant for suspicious texts and emails, Sladden said they should be able to conduct financial affairs in a “safer banking environment”.
Sladden said she sensed growing support for better protections and was “anxious” they were introduced “sooner rather than later”.
Roger Beaumont, chief executive of the New Zealand Bankers Association. Photo / Dean Purcell
New Zealand Banking Association chief executive Roger Beaumont welcomed calls for digital platforms to remove fake websites, which were often at the start of a chain of events leading to scams.
“Banks have got the ball rolling on the anti-scam centre by targeting mule accounts. Involvement from government and other sectors would take the anti-scam centre to the next level.”
He said retail banks unveiled a suite of initiatives in September to prevent scams and protect customers, including a confirmation of payee service.
“This is a priority for the industry with work under way to implement it.”
Consumer NZ chief executive Jon Duffy said Consumer NZ supported Sladden’s call for urgent action and believed it was time for the Government to regulate.
“Banks have had opportunities to improve their systems and respond to customers’ demands. A long list of people have demanded that the banking sector take action but we are seeing no results. The Government needs to step in.
“Without a big stick it’s clear that the banks aren’t going to move voluntarily or won’t do it quick enough to have meaningful effect on New Zealanders who are being scammed out of their savings right now.”
