The banking sector has announced a raft of new measures to fight fraud and counter the growing scourge of scams. 

NZ Banking Association chief executive Roger Beaumont said it involved a co-ordinated, multi-sector approach to help protect New Zealanders, including new systems to match account names between banks, the ability to freeze “money mule” accounts and the removal of all weblinks from texts to customers. 

However, there are no timeframes for the proposed changes, which will “vary depending on their complexity and feasibility”. 

The announcement comes days after the industry was accused of “corporate failure” and confirmation that victims were considering a possible class action against the banks. 

While today’s joint commitment by retail banks was expected to have an impact in tackling fraud and scams, Beaumont warned that the industry could not address this issue in isolation. 

“Scams go much wider than our industry, affecting government agencies, including police, telcos, social media companies, internet service providers and other sectors too. 

“Our retail banks already have systems in place to help detect and warn customers about potential scams and the further initiatives announced by the industry today are expected to have a significant impact in combatting scams. 

“But we have reached a point where a new approach to fighting fraud and scams is required and this will need the involvement and investment of all affected sectors.” 

The new measures include: 

• Supporting the establishment of a centralised, co-ordinated, multi-sector national Anti-Scam Centre. 
• Instigating an industry-wide “confirmation of payee” account name-checking service. 
• Committing to removing all weblinks from texts to customers. 
• Working together to combat “mule” accounts. 
• Investigating the sharing of real-time information between organisations impacted by scams. 
• More consistent and timely outcomes for customers who suffer financial losses. 
• Driving further public awareness of scams and how to avoid them. 

The banking industry has been under growing pressure to take action to protect customers amid numerous reports of New Zealanders being fleeced. 

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Overseas criminal syndicates are estimated to be draining hundreds of millions of dollars from Kiwi victims each year. 

A Herald investigation has uncovered a raft of cases this year alone in which victims lost their life savings in elaborate investment scams, thinking they were investing in term deposits with reputable international finance companies such as Citibank and HSBC. 

The criminals use local “mule” accounts to receive the money and then immediately transfer the stolen cash offshore. 

This week, former fund manager and investment banker Janine Starks called on the Banking Ombudsman to launch a joint investigation into the cluster of investment scam cases, citing what she believed were “corporate failure” and negligence by New Zealand banks. 

She claimed there were “systemic failures” across the banking sector in fraud detection and consumer protection, leaving customers at heightened risk. 

Starks believed the domestic banking industry had fallen well behind many of its OECD peers by failing to keep security systems up to date with emerging threats. 

Former fund manager and investment banker Janine Starks has accused New Zealand banks of negligence and failing to keep customers safe from fraud. Photo / Alex Burton 

These failures include inadequate algorithms that failed to detect suspicious transactions or pick up references to known scams; poor staff training and knowledge of recent FMA scam warnings; and the lack of payment systems to match account names with recipient banks. 

“We’ve got so far behind that it’s absolute negligence on the banks’ behalf and it’s an embarrassment internationally what they’re getting away with,” she claimed. 

She had been working pro bono with a group of victims whose banks had refused liability for their losses and who had now complained to the Banking Ombudsman. 

That group includes North Shore real estate agent Carla O’Neil, Whangārei health worker Borja Ares and Whanganui health administrator Jo Hurley, who between them lost nearly $800,000 to a Citibank-branded ruse earlier this year. 

They and other victims are also consulting a lawyer about a possible class action against the banks. 

Carla O'Neil lost $100,000 in an elaborate Citibank-branded investment scam earlier this year. Photo / Michael Craig 

Beaumont said the measures announced today fell into three areas. 

“Making it harder for criminals to operate in New Zealand, making it harder for them to target New Zealanders, and supporting ongoing public awareness of scams and how to identify them. 

“We support the establishment of an Anti-Scam Centre, similar to the one in Singapore, which would provide a centralised and co-ordinated multi-sector approach to fighting scams from a New Zealand-wide perspective. Telcos and social media companies have indicated an interest in supporting this initiative, and we look forward to working with them and others, including the government, to further protect New Zealanders. 

“Work is underway to look at 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 are paying. We will need to investigate privacy considerations and banks’ ability to disclose account names to third parties, as well as technical issues. Banks will work with Payments NZ, which governs the payments system, to help make this a reality.” 

He said banks did not currently send text messages asking customers to log in to their online banking. Banks were also working to remove all weblinks or hyperlinks in text messages to customers and encourage other industries to do the same. 

“Links in texts are one common way scammers pretending to be a legitimate organisation mislead victims into providing personal information. Removing links from texts reduces this kind of scam risk.” 

Banks were also investigating the ability to freeze mule accounts, Beaumont said. 

“The mule account owners may be complicit with the criminals or may not be aware their accounts are being used in this way.” 

He said banks would also look at “improving consistent and timely outcomes” for customers who suffered financial losses. 

“Under the Code of Banking Practice, banks reimburse customers for unauthorised payments where the customer hasn’t been dishonest or negligent, has complied with the bank’s terms of conditions, and has taken reasonable steps to protect their banking. The industry will work closely with the Banking Ombudsman to support a more consistent and timely response to customers who have been scammed.” 

ASB has been under pressure after allegations that a customer in Whanganui had used his account to launder up to $1.25 million from six victims before sending the money offshore. 

In a statement today, ASB chief executive Vittoria Shortt said keeping people safe from fraud and scams “is a focus area for us”. 

“Like other organisations, we are already investing significant time and money in combating fraud and scams but we believe much more can be achieved from a truly joined-up national approach, with banks working more closely together, alongside government, telcos and other private sector companies. 

“We have seen this approach work successfully overseas – for example, the Singapore Anti-Scam Centre – and we are working with peers around the world to understand how their learnings can be implemented here. 

“This is an incredibly complex problem which requires equally complex solutions and a multi-pronged approach to fight this issue on multiple fronts. The programme of work we’ve announced today is an important step towards the national capability that New Zealanders need.”