Banks, social media companies, government agencies and police urgently need to collaborate to tackle a rise in so-called “romance” scams and online fraud, the Banking Ombudsman says.
The ombudsman is calling for a review of the current framework when it comes to bank processes and consumer protections for scams.
A Stuff investigation revealed at least three New Zealand women, Joanne, Donna, and Samantha – not their real names – have been tricked into giving more than $2 million between them to men they met through the online dating app Tinder in near-identical cons.
Police say millions of dollars a year are being swindled from women in romance scams, believed to be run by organised criminal groups based offshore.
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Following the revelations, Parliament’s finance and expenditure committee agreed to open a briefing on the responsibility of banks in identifying and protecting customers when it comes to the “hallmarks” and “red flags” of such scams.
On Wednesday, Banking Ombudsman Nicola Sladden told committee members it was clear that scams and complaints were a “significant and growing issue”, with the number of complaints increasing four-fold over the last seven years.
“Stopping scams in the first place is the key priority and of utmost importance, and it’s an aim that should be shared by a number of sectors and agencies,” she said.
“It’s not just the volume of complaints that is increasing, it’s also the sophistication and the sums involved that are increasingly concerning.”
Scams were categorised into two types – unauthorised scams, such as remote access scams, and identity theft and authorised scams, where people were tricked into making payments to people they think are legitimate but are in fact fraudsters.
In New Zealand, banks would usually be required to reimburse victims of unauthorised scams unless they had acted negligently, Sladden said. However, victims of authorised scams were unlikely to be reimbursed.
Banks had a responsibility to have “reasonably robust” fraud detection systems.
Sladden said banks had a wide range of fraud prevention measures, with ANZ telling her they detected at least three quarters of fraud.
At a minimum she expected banks to make further inquiries when they saw red flags and warn the customers. In some cases they could decline to make the payments and restrict their banking.
Sladden said there had been regulatory and policy development in relation to consumer protection from scams in Australia and the United Kingdom, and both countries had enhanced their frameworks for preventing scams.
Banking Ombudsman Nicola Sladden appeared before Parliament’s finance and expenditure committee to discuss bank processes and consumer protections for scams.
“We consider it might be timely to review the current framework here in New Zealand to ensure that the settings are appropriately positioned for today’s consumers, given the new technologies that have emerged, and also the significant change in the payments landscape, particularly over the last two years, with the rapid digitisation of banking.”
The framework should give customers and banks alike an “incentive to be vigilant” to respond effectively and promptly to scams. This included banks having strong fraud detection and fund recovery measures.
She said combating fraud was a “significant policy issue” and warranted a “joined-up approach”.
A woman who lost $1 million to a Tinder swindler recorded this conversation.
“We consider there’s a need for urgent collaboration between a much wider range of stakeholders, including other industries, telcos, social media platforms as well as government agencies, law enforcement, [and] the privacy commissioner to try to do better and to keep ahead of these very sophisticated frauds.”
Sladden said there was a “real spectrum of views” as to who should be responsible for people who are victims of romance or investment scams.
In Australia and the UK the level of responsibility on the individual is lower, with customers in Australia being refunded in unauthorised scams unless they were extremely careless. In the UK, a victim would have to be “grossly negligent”.
While Australia had a similar framework to New Zealand when it came to authorised scams the UK has gone further, and banks are increasingly liable to reimburse customers for romance and investment scams unless they had already warned the customer and or they had been grossly negligent.
“Our view is that the payments landscape has shifted considerably. There are new technologies, there are all sorts of new regulatory and policy interventions that are being introduced internationally, and there is an opportunity to review and reflect as to whether or not those might be appropriate here.”