Australian Politics
Tuesday, July 11, 2023
While Australian banks refuse most scam victims refunds, the UK is making them mandatory
This is probably going to happen in some form but there will be downsides to it. Money transfer these days is pretty instantaneous, which is a long way from the old practice of requiring a 3 day wait before funds become available to the transferee. It would be an easy way for banks to protect themselves to bring back such waits universally, which could be a serious inconvenience to many payees
The United Kingdom will force banks to compensate scam victims under a world-first scheme that kicks off next year — and Australia could follow suit.
New laws in the UK represent a bold experiment to see if making the banking industry liable will drive down enormous losses, by incentivising banks to invest in detection and prevention.
In Australia, there has been strong resistance from the banking sector to compensate scam victims despite losses reaching a record of more than $3 billion last year.
But Financial Services Minister Stephen Jones today gave his strongest indication yet that Australia may bring in similar laws.
"[We're] definitely going to lift the bar and we're definitely going to ensure the banks are accountable for much more," he told ABC Radio Brisbane.
"When you look at what the UK does, we'll probably look at something which travels in the same direction."
Chris Hemsley, from the regulator behind the change in the UK, said it was needed to better protect people from serious harm and give them confidence in the financial system.
"What we're trying to do here is to design this fraud out of the system," said Mr Hemsley, the managing director of the UK's Payment Systems Regulator (PSR).
"Otherwise, in the longer term, it will start to undermine all the things that we actually rely on our payment systems to do."
Do you know more about how banks detect and prevent scams? Contact [email protected]
Under the UK scheme, customers will be paid back within five days. They will only be knocked back if they have acted fraudulently or with gross negligence.
British bank gets ahead of laws, sees fraud fall
Some banks support the move, including TSB Bank, which has already adopted similar measures.
About four years ago, TSB started reimbursing almost all customers who fell victim to scams, including clients who were tricked into making payments.
The bank has seen a reduction in fraud, despite refunding 97 per cent of fraud claims since the scheme began, TSB's fraud prevention director Paul Davis said.
"I've seen firsthand the incentive it places on us to stop fraud happening, because when it does happen, the cost sits directly with TSB," he said.
"Our share of losses is well below what we would expect for a bank of our size, and I'm really confident that when the payments regulator mandates this action across the industry, other firms will see exactly the same things that we've seen."
Mr Davis said the bank had also banned its customers from sending money to cryptocurrency exchanges after finding one in five such transactions were later reported as fraud.
"It's quite an unprecedented decision … but we couldn't walk past that fraud rate and we couldn't overlook the fact that because of our refund guarantee, we'd be on the hook for reimbursing all those customers," he said.
Australian laws are 'weak', advocates argue
Australia's main financial industry group, the Australian Banking Association, has argued against reimbursing scam victims, saying it would create a "honeypot" effect and entice criminals to target Australians more often.
The big four banks reimburse less than 5 per cent of scam victims, according a recent report.
Mr Hemsley said the ABA recently met with the UK regulator and discussed the UK's decision to reimburse fraud victims.
"I think we had a conversation with them about a whole range of topics, but of course we did talk to them a lot about our approach to fraud, just to share what we're doing and why, and explaining how we're implementing that process," he said.
The ABA said: "The key takeaway from discussions with UK stakeholders was that a mandatory reimbursement model on banks alone does not create the most effective incentives for all organisations to work together to disrupt scams."
Scam victims and consumer groups have seized on the UK move, arguing Australia should immediately look to adopt a similar reimbursement scheme.
"I think there's been a market failure in Australia," the Consumer Action Law Centre's acting chief executive Tania Clarke said.
"The laws are weak and it's time for the government to actually step in and introduce the tough new codes so that we can actually get some real action in Australia."
'They've done nothing wrong'
Just like in Australia, scams are fleecing more people in the UK out of massive amounts of money, which is what prompted this new approach.
Last year, there were more than 200,000 reported cases for what the UK calls "push payment fraud" — which is when a fraudster tricks someone into sending a payment to an account outside their control — with losses totalling 485 million pounds ($930 million).
These figures represent an increase of 6 per cent in the number of victims from 2021, though the amount of money lost actually went down by 17 per cent.
UK banks WILL NOT have to pay if:
The customer has acted fraudulently
The customer has acted with gross negligence
The transaction involved cryptocurrency and international payments
UK banks WILL have to pay if:
The customer was tricked into transferring money
The customer clicked on a fake advertisement on social media
The customer was phished or hacked despite precautions
The customer was groomed over time (ie romance scams)
In Australia, if a customer transfers funds to the wrong account, the bank that sent the money is largely responsible for dealing with the complaint, rather than the bank that received it.
They also have no obligation to repay scam victims.
Under the new UK laws, both the sending and receiving bank will be responsible for repaying half the loss each.
Mr Hemsley said the bank whose customer transferred the money out had a responsibility to protect that person.
"They know more about their customer and have a better chance of spotting whether that transaction is unusual for that customer," he said.
On the other side, the bank which received the funds – and may have allowed scammers to open or misuse an account with them — must also take some responsibility, he said.
Making the receiving bank responsible for losses is part of the regulator's attempt to crack down on "money mule" accounts, which are used to transfer illegally-acquired funds through the system and out of the reach of law enforcement.
How 'money mules' dominate scams
Money mule accounts are used in the majority of scams reported to the consumer watchdog. The ABC talked to a victim who lost $300,000.
"Have they done the right checks? Have they checked that this business [opening an account] is a legitimate business?" Mr Hemsley said.
"By creating incentive on both sides of [a scam transaction], it gives both of the firms an incentive to actually prevent these frauds in the first place."
There are still contentious issues to sort out. One of the most pressing is the maximum amount a person can be refunded.
'They're all on board' in the UK
Consumer groups say Australia is lagging behind the UK, and the federal government agrees.
Financial Services Minister Stephen Jones said a tough new code of practice for banks was being developed, with public consultation to begin soon.
He said he expected the code would make compensation payable to victims when banks did not meet their obligations.
The upcoming changes in the UK follow other measures introduced to try and tackle scams.
A voluntary reimbursement model was introduced in 2019. Last year, it resulted in banks paying back about 66 per cent of losses to scam victims.
The regulator argues that has driven change, pointing to UK building society Nationwide's unique scam checker service where customers who are uncertain about a payment can check it with a staff member before making it.
The widespread adoption of confirmation of payee, where customers can use a name-checking service before sending out money, has also helped reduce misdirected payments and some scams.
However, some in the banking sector do have reservations with the new scheme, warning of negative consequences.
In particular, some believe more customers should be excluded from reimbursement because gross negligence is too high a bar and more caution should be required.
And there are fears scams could increase as customers take less care and make the UK a greater target for criminals.
Institutions are also worried about being forced to slow down many types of legitimate payments, which would lead to widespread frustration.
Finally, some said the new costs could lead to some firms leaving the UK.
But Paul Davis from TSB disagreed with many of those concerns.
"There's worries about fraudulent claims being raised by their customers," he said.
"But all I can say is that from our experience, we've not seen those things and the fraud refund guarantee that we've offered has been incredibly positive, both for our customers in terms of giving them protection and it's the right thing for our business."
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Is Australia taking a different path to US on free speech?
Whether the US court ruling survives remains to be seen: the Biden administration has appealed amid widespread indignation – based on its censorship-industrial complex – that a court has dared stop the government from “keeping people safe”.
The outlook for free speech is even less certain in Australia, where the government is set on passing the Combating Misinformation and Disinformation Bill, which can only be described as a shameful, Orwellian piece of legislation that would empower the government to censor just about anyone for anything.
It’s a step on the path towards the style of governance we see in China, where the Chinese Communist Party works hand-in-hand with social media platforms to silence views it doesn’t like and control “the narrative”.
Under pain of financial penalty, the bill would compel social media companies to remove any speech that caused “harm” to Australians’ “health”, to “the environment”, or any “economic or financial harm”. Of course, this also includes the usual prohibition of undefined “hate speech”. These definitions are ridiculously broad, giving the green light to censorship of posts critical of the government’s 2050 “net-zero” carbon emissions goals, for instance, or criticism of compulsory superannuation (which, ironically, is a cause of economic harm).
The collective shrug when it emerged in May that the Australian government had been urging Twitter and other social media platforms to take down posts it didn’t like during the pandemic – including those poking fun at Dan Andrews – foreshadows a worrying deterioration of our freedom.
At the very time when our population is arguable more educated than ever (at least on paper), governments have decided to take a greater role in limiting what we can say, read and hear.
The response to the pandemic, far from justifying such a shift, should highlight the absurdity of allowing governments the right to be arbiters of truth.
It’s naive to think the motivation for government censorship is genuine concern for people’s welfare. It’s more likely an ideological power grab from individuals who don’t like freedom of speech and yearn for a more powerful role for government in policing truth – especially now the technological tools have emerged to achieve information domination.
Even if it were the motivation, and even if censorship could “save lives”, it’s not worth it.
To quote Franklin again: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither.” Free speech is the bedrock of all other rights. Australia and the US appear to be parting ways on the role of race in public life, as evidenced by the looming voice proposal on the one hand and the US Supreme Court’s quashing of race-based affirmative action at universities in a landmark ruling last month.
We appear to be taking different tracks on free speech, too, which is more ominous: the government’s misinformation bill would also outlaw speech that “harms the integrity of government institutions”. We should resist this while we still can.
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UK, EU attempt to kill our major industry
Australia’s $4bn dairy industry shuddered on learning that Trade Minister Don Farrell had broken his holiday to travel to Europe to ‘save’ the European free trade negotiation and complete an Australian defence equipment export deal with Germany.
In such a euphoric environment, Australian dairy farmers could be easily classified as collateral damage in any EU-Australian trade deal.
Already the celebrations that the recently negotiated UK-Australia trade deal would deliver major gains for the Australian beef industry are being tempered by reality – perhaps in the light of the Australian unpopularity that arose out of the Lord’s test.
Australia does not export any significant quantities of cheese to Europe and the Europeans not only want to keep it that way, but seek to damage Australian dairy exports to other countries while lowering the productivity of the whole Australian dairy industry.
They have found a way to do it, and also have our beef industry in their sights.
Former trade minister Andrew Robb triggered trade deals around Asia, but he believed that the power of European and UK farmers was too great and that Australia that would never make inroads in that area and might, in the process, damage prospects of exporting agricultural products to other countries.
Australians find it hard to understand why Europeans don’t want to buy our low cost and efficiently produced agricultural products. Instead they prefer to subsidise their high cost farmers.
On the surface it might make no sense, but for UK and European residents this strategy evolved from historic experience.
In the 19th century the English set up a global low cost food sourcing network in the belief that its powerful navy could protect ships carrying food from Australia, India and other countries in the empire.
In the First World War, German submarines ravaged that supply chain and the British had to reignite their farming industry.
In the Second World War, the UK’s ability to grow food prevented starvation. Mainland Europe had not developed its food production sufficiently and starvation became widespread.
After the war the European farming lobby became very powerful with strong community support.
Accordingly, Andrew Robb has refused to take them on. When he stepped down and the Asian deals were completed, there remained in Canberra an entrenched public service free trade negotiating skills base who almost saw a European trade deal as akin to climbing Mt Everest.
Meanwhile, the Europeans have a much wider agenda than simply damaging Australian dairy and agriculture.
Step by step they are exporting the European regulatory system around the world. Any free trade deal with Australia will inevitably become part of that thrust.
In the 20th century migration boom many European farmers came to Australia to develop dairy and make cheeses using European names like feta, parmesan, haloumi and many others.
They also developed the Australian wine industry using the European names of grapes.
The great danger for Australia is that the negotiators will see the likely destruction of smaller enterprises making these cheeses as not all that important in the wider scheme.
But they have become a vital part of making the Australian dairy supply chain efficient.
The Australian industry is becoming widely respected in Asia and any attempt inflict blows on our manufacturing base so as to boost European dairy exports to Asia is not in the national interest.
But that’s just the start of the European regulation export campaign.
When it came to the UK free trade deal there was great celebrations in the beef industry when we secured an increased quota for Australian beef exports that would rise sharply over the coming decade.
Farmers saw a potential return to the glory days of exports to Britain.
Many countries, including China, do not want beef where hormones have been used to stimulate growth.
In our exports of beef to China we provide an industry declaration and testing system that involves farmers and meat processors.
The Europeans take that one step further and require every farm to be registered.
In the UK free trade agreement we did not complete the negotiation as to which system would be used and it’s no surprise that, to date, the British are using the European system.
The negotiations are proceeding.
Meanwhile, another European regulatory front is opening to hit non-European agriculture.
At this stage the details have not been hammered out but if agricultural products are grown in areas that were once forested they will be subject to restrictions.
Depending when the cut off point is declared large areas of Australian agriculture will be impacted.
We might find that this will creep into other trade deals we have done.
Australia’s problem is that we see free trade deals as boosting the areas of the Australian economy where we are very low-cost producers and we see ourselves is benefiting the world.
But other countries don’t always see it that way and we have to understand that Europeans have a much wider area of ambition.
I suspect Andrew Robb was right.
But meanwhile, the detail in any European free trade agreement becomes vital.
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Communistic workplace laws: Seeley
One of Australia’s major manufactures has launched a scathing attack on the Albanese government’s industrial reforms, warning the company would have to sack and rehire its casual workforce every three months to comply, dealing a “class war” death blow to productivity.
Claiming same job, same pay laws being drafted by Workplace Minister Tony Burke were “communistic”, the head of Seeley International, the largest airconditioner manufacturer in the country, says it had received advice that companies that hired seasonal and casual workforces would be forced to lay off staff or become unviable.
The government has yet to release its proposed draft laws, claiming it was still consulting. But it has flagged exemptions for labour hire, short-term and seasonal work to be defined as three months or less. Workers employed beyond that would need to be paid on a full-time basis.
Jon Seeley, managing director of Seeley International, said his company would be forced to sack its seasonal workforce after three months, and hire them again to be in compliance. He described the proposal from the government as “draconian” and a “fantasy of Chalmer-nomics”.
“We are one of the last remaining Australian airconditioning manufacturers, with a strong seasonal element to our business,” Mr Seeley told The Australian.
“We hire as many permanent positions as we can keep busy throughout the year, but there is always a significant requirement for additional workers during the summer and winter peaks.
“We have many casual staff who find this arrangement suits them perfectly, coming back year after year to work hard for three or four months, earning good wages including their 25 per cent casual loading, then heading off to do other things for the rest of the year. The advice we are receiving is that the draconian industrial relations changes being rammed through will force us to offer these team members permanent roles, with no leave loading, then sack them three months later.
“Everyone will be worse off – workers, employers and the economy more broadly.
“The only upside I can see is that the Labor government will have delivered on its commitment to militant unions, forcing the perverse worldview of the minority on to the 90 per cent of private sector workers who choose not to be union members.”
Mr Burke attacked Mr Seeley’s claims as “wildly misinformed”.
“These claims are wildly misinformed and have nothing to do with anything the government has put forward. But I suspect they already know that,” he said.
“I’m relieved that none of the reputable business organisations involved in the consultations have made any claims as breathlessly stupid as that one.”
Mr Seeley accused the government of being locked into a fictional “class warfare” worldview that portrayed employers as exploiters of workers. “These massive changes … run a sword through reward for effort and experience.
“The result of this communistic view of the workplace is the death of productivity. What is the incentive to work hard when your peers, no matter their experience, age or work ethic, get paid the same? Like the physical laws of gravity, the basic laws of economics cannot simply be “magic-ed away” by the fantasy of “Chalmer-nomics.”
The government’s IR proposal has also been criticised by the Minerals Council of Australia, Business Council of Australia, Australian Chamber of Commerce and Industry, Australian Petroleum & Exploration Association, Master Builders Australia, National Farmers Federation, Council of Small Business Organisations Australia and the Recruitment, Consulting and Staffing Association.
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http://edwatch.blogspot.com (EDUCATION WATCH)
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http://jonjayray.com/blogall.html More blogs
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