Raising the bar in the fight on scams

Roger Beaumont

Published in KPMG’s Financial Institutions Performance Survey Review of 2023, 13 March 2024

Scams targeting New Zealanders are on the rise, and they’re becoming increasingly sophisticated. The impact can be devastating, with some people losing their life savings. Because of the customer impact, and the fact that banks are often at the end of a chain of events that makes up a scam, last September our retail banks came together to announce they were working on a suite of initiatives to help prevent scams from happening.

The harm is real. Scams are like a ‘digital ram raid’. The Ministry of Business, Innovation and Employment recently said 11 of New Zealand’s largest financial institutions reported $198 million was lost to scams in the last year. In reality that might be the tip of the iceberg, when you take into account the different types of scams, and fraud losses that may not be reported.

The idea behind the anti-scam initiatives is to help protect New Zealand as a whole from scams, to provide individuals with greater protection from losing money to scams, and to raise awareness of scams and how to avoid them.

Banks already invest significantly in fraud analytics and prevention to identify unusual customer spending patterns, warn customers of potential scams, and shut down fake bank websites and phone numbers used in scams. Banks also facilitate two-factor authentication, which allows customers to stop unauthorised payments from their account. They also provide pop-up messages in online banking and mobile banking apps to alert customers to activity occurring in their accounts.

To raise the bar in the fight against scams, the retail banking industry has announced a commitment to the following key initiatives:

  • Supporting the establishment of a centralised, co-ordinated, multi-sector national Anti-Scam Centre
  • Bringing in an industry-wide ‘confirmation of payee’ account name checking service
  • Removing weblinks from texts to customers
  • Raising public awareness about scams.

Anti-Scam Centre

Scams take many forms and often start with a digital hook such as a fake website, fake ads on social media, and emails and texts from criminals pretending to be someone you trust. Scams often involve telcos, social media companies, internet service providers, and search engines, and of course the banks which facilitate customer payments. So, it makes sense to bring all affected parties into the tent to help fight scams, along with government agencies including the Police.

Banks got the ball rolling on the Anti-Scam Centre in December by focusing on detecting and sharing information on mule accounts, which are used by criminals to transfer illegally obtained money. Mule account owners may be complicit with the criminals by receiving and making payments on their behalf, or unwittingly allowing access to their account for the fraudsters to make those transactions. Identifying and sharing information on mule accounts helps break an important link in the chain that scammers use to move stolen money.

Banks previously shared some information on money mules, but this initiative increases the speed and amount of information being shared.

This year the banking industry will work to engage other sectors to build the capacity and effectiveness of the Anti-Scam Centre.

Confirmation of Payee

We’re currently assessing options for a confirmation of payee service to enable anyone making an online payment from one bank account to another to check the name of the account they’re paying. This will help people check who they’re making a payment to and may help identify payments to scammers. It will also help people avoid making mistaken payments to the wrong account. It’s a useful double-check when making payments.

It’s important we take the time to get confirmation of payee right for our payments environment. Along with looking at technical options for confirmation of payee, there’s extensive work underway to help ensure banks continue to protect customer privacy.

We’re expecting to announce progress on this initiative in April. To do that we are currently assessing a number of options to build our own confirmation of payee solution, or partner with a third party technology provider, of which there are several in New Zealand and overseas.

Getting confirmation of payee designed, built, and implemented across the banking industry will be determined by a number of factors, including agreeing an account name and number matching solution, and ensuring it can be delivered by our retail banks. The data sharing solution will also need to comply with privacy law and banks’ obligations to protect customer confidentiality. Banks will need to build and implement relevant changes to their online banking and mobile app platforms. Getting confirmation of payee to go live will depend on addressing all these elements.

It’s also important to recognise that none of these initiatives is a silver bullet in the war on scams, especially given the constantly evolving nature of this kind of crime. UK Finance has reported that authorised push payment fraud is still rising in the UK, despite the introduction of confirmation of payee there in 2020. It seems that reliance on a single scam prevention mechanism may have encouraged complacency. An effective anti-scam strategy needs a layered approach involving different protective measures and all the participants in the ecosystem working together to help prevent scams.

Removing links from texts

Scammers often use weblinks or hyperlinks in text messages to gain access to people’s bank accounts. To help reduce this kind of scam risk, banks have committed to removing links from texts to customers. Some banks are already there, with other following as soon as they can.

Raising scam awareness

Raising public awareness about scams and how to avoid them is also critical in helping to prevent scams. Our banks already provide scam information tips to their customers through a variety of channels, including TV advertising, social media, and on their websites. To complement that we ran a ‘Take a Sec to Check’ radio advertising campaign over the summer holidays. The idea was to encourage people to ‘take a sec’ before making a payment or giving away personal information, just to be sure it’s not a scam.

Last year banks also funded a TV documentary commissioned by the Banking Ombudsman called ‘You’ve Been Scammed By Nigel Latta’.

We’ve partnered with online and print media companies to run special projects on scams to help raise public awareness. Because scammers never sleep, public awareness will need to be ongoing, even after we’ve implemented our scam prevention initiatives.

Improving outcomes for scam victims

Banks already reimburse fraud losses in cases of unauthorised payments from a customer’s account, so long as they complied with the bank’s terms and conditions and acted reasonably. We’re consciously focusing on preventing scams, including those that involve authorised push payments, where people believe they are making payments to legitimate entities. In those cases, banks generally won’t reimburse the loss, although it very much depends on what happened in each case. Given the harm caused by scams, we think focusing on prevention is much more effective in the long run.

That said, we are also working with the Banking Ombudsman to find ways to improve outcomes for customers who lose money to scams. That’s around more consistency in outcomes for scam victims, which can be challenging because each case is different, and banks have their own processes in place to respond to scam loss claims. We are also working to improve the way banks communicate with customers who have been scammed, and the time taken to resolve scam claims, which once again can vary depending on the facts and complexity of the case.

A multi-sector layered approach

Our banks are proud of the commitments they’ve made to fight scams, and they know it’s a fight that won’t go away soon. The constantly evolving nature and sophistication of this kind of crime means we all need to be vigilant.

We need to work together. Banks are usually at the end of the scam chain, and to effectively crack down on scams we need all participants in the chain to play their part to help stop this crime. And as this is an issue for New Zealand Inc, the government also has a role to play.

We’re taking a layered approach to preventing scams, and that’s why the banking industry is committed to several initiatives we hope will work in with each other to reduce the financial and social harm caused by scams. None of this is easy, but we’re taking on the fight.