Is it fair to expect Australian banks to reimburse us if we’ve been scammed?

I recently interviewed an 88-year-old woman who had been scammed out of $49,000. She acted quickly, and presumed the bank would be able to recoup her money.

In her case, she downloaded a third-party app, before logging into her bank account as instructed. She shared the security code with the scammer, enabling them to authorise the transaction before quickly realising she had been duped, hanging up the phone.  

She had the account number where the money had been transferred to and an investigation was launched, but despite being a customer at her bank for 60 years, the bank said there was nothing they could do to get her money back.  

How scammers operate

Scams are growing increasingly complex and sophisticated. Sometimes pretending to be from your bank, scammers might target you online or social media, or by phone, text or email. If they’re clever, they might give you some information that seems genuine to try and gain your trust, or may suggest there’s a problem to fix, such as a problem with your computer, an overpayment or suspicious activity on your account.  

Collectively, Australians lost $2.7 billion to scams in 2023, with online dating and romance, investment, products and services, threat and extortion, employment, and impersonation scams among the most common. Victims are encouraged to report their scam to the National Anti-Scam Centre, but Scamwatch says people often feel ashamed, resulting in around 30 per cent of victims never reporting it. 

There has been strong resistance from the banking sector to compensate scam victims. And while Financial Services Minister Stephen Jones has vowed to crack down on organisations that enable scams and don’t pay up, indicating a keenness to ‘redesign fraud out of the system’, banks reimbursing scam victims doesn’t appear to be on the government’s radar.   

While the banks put the onus on their customers to ‘hear the alarm bells’, Labor wants scam victims to be compensated under a plan to fine banks and social media platforms $50 million and be forced to pay compensation if they fail to protect customers from scams.  

The banks argue against reimbursing scam victims, saying it would create a honeypot effect that would entice criminals to target Australians more often. The other argument is that reimbursing funds lost in scams would make the crime ‘victimless’, making consumers even more attractive to money-hungry scammers.  

Currently, if a customer in Australia transfers funds to the wrong account, the bank that sent the money is responsible for dealing with the complaint, rather than the bank that received the funds. The banks are also not obligated to repay scam victims.

Banks educate, not reimburse

Instead, banks have embarked on an education campaign reminding customers to remain vigilant to the threat of scammers, while the recently announced Scam-Safe Accord includes a $100 million investment by banks in a new confirmation of payee system to ensure people can confirm they are transferring funds to the person they intend to. 

It’s a far cry from the UK, where most banks already voluntarily compensate customers who are tricked into sending money to scammers, but in a world first, authorities recently mandated that banks must refund fraud victims up to $EU85,000 within five days, unless they are at fault. 

As of this month, a new shared liability proposal by the Payment Systems Regulator is expected to impact financial institutions around the world. The system makes both sides responsible for the reimbursement, which is hoped will encourage collaboration between all players to detect and prevent scams.  

It’s a policy welcomed by CHOICE and the Consumer Action Law Centre, which wants the government to go a step further and establish a reimbursement model similar to that used in the UK. They work with victims, who often don’t ever emotionally recover from the ordeal.  

Who is the onus on?

The Australian Securities and Investments Commission (ASIC) has been clear that banks aren’t doing enough to protect vulnerable customers. Despite this, the banks rely on a tenuous moral argument that suggests that customers will be less attentive and take greater risks if they think they are in line for compensation.  

Perhaps Australian banks can take a leaf out of UK’s TSB Bank, which started reimbursing almost all customers who fell victim to scams about four years ago. The bank says the results were stunning, actually resulting in a reduction in fraud. 

TSB says voluntarily reimbursing scam victims resulted in its share of losses sitting well below what it would expect for a bank of its size.   

Examples of these gestures of goodwill can foster loyalty and trust between banks and their customers, beyond strict legal or educational obligations. While victims can face significant distress, offering reimbursement is an ethical way for banks to support their customers, helping both restore their financial and emotional well-being.

While there is an asymmetry of resources and knowledge when it comes to keeping our money safe, a shared responsibility acknowledges the ethical duty to continually improve safeguards when it comes to scams.

After all, it’s compassionate business practice and a shared burden that strengthens corporate character.