When is a scam not a scam?
When it is a bank that operates it, and the government supports it.
Do you know what a scam is? In the Cambridge English Dictionary, a scam is defined as “an illegal plan for making money, especially one that involves tricking people”.
Do you know that the government is protecting the banks legally in operating a scam where the banks assign all the risks, accountability and responsibilities to the consumer but not themselves?
We all do Internet banking. When we pay someone and transfer money into their account, we have to provide the following details: the name of the Account, BSB number and the Account number. There is a warning given to ensure the details are correct, and the bank will not be liable for any mistake made by the consumer. Despite this warning, we all believe that the bank will transfer the money into the correct account name; otherwise, why should they ask for an account’s name?
If the customer made a mistake, then one would agree the bank should not be liable as they have given you a warning. But what happens when the customer is not at fault but the internal transfer system between banks is at fault? Who is liable?
Let me give you an example of a recent case where a consumer receives a fraudulent email from her financial advisor where to transfer funds. In it, the fraudster changed only the banking details. Everything, including the transfer name, remained the same. Unwittingly, the transfer of funds took place. The following day the financial advisor rings to tell her that the money was transferred into the wrong account and a different bank. Her bank was immediately alerted about this fraudulent transaction, and eventually, 80% of the funds were recovered. She incurred a loss of 20%.
It is a case where the customer is a victim who was unaware of a change in banking details. What the customer did or did not do, did not influence the outcome of the case. The fraudster knew that the banks do not match account names and exploited the internal system of funds transfer between banks. Is the bank responsible for this loss? Is it negligent not protecting the consumer’s interest by not having proper security measures installed? The bank knew about this weakness in their security system, which is the reason for their warning. The bank denies all liability, and the matter is taken to AFCA (Australian Financial Complaints Authority) for resolution.
After months of deliberation, AFCA ruled in the bank’s favour. It said that the bank had no legal obligation to match accounts and check where the money goes. Thus we have a situation where the banks cannot be held legally liable for any internal transfer of funds between banks. If that is the case, the question arises, who is? Are the laws meant to protect the consumers or the banks?
This case exposes a hole in the bank’s security system where the fraudsters, money launderers etc., are having a field day. There is no protection for the consumer. The banks are safe in just warning their customers about this hole. They are not legally required to put barriers around the hole, so some unfortunate unwary customer like the one above does not fall in it. They are saying we take every care, but no responsibility and the government supports their stance.
Clearly, the government is giving preferential treatment to the banking industry when it comes to consumer protection. The same treatment does not apply to other sectors such as the medical profession, where doctors are often being held responsible for matters beyond their control. How would you feel if the surgeon, with the backing of the government, warns you about your operation by saying, “I will take every care, but no responsibility for any swab left behind”? Wouldn’t you treat the consumer laws protecting you as a big joke?
So the question arises that if the bank is not legally liable for any internal transfer of funds between banks, who is? How is the consumer protected? It seems no one is interested in plugging this hole in the security system because everyone, except the hapless consumer, is complicit in making money out of it.
How ironic that AFCA, the authority established to handle consumer complaints, cannot answer these fundamental questions.