Losses from consumer scams at $3 billion, and rising

Australians are increasingly suffering cost-of-living increases and mortgage stress. On top of this, a report from the ACCC (Australian Competition & Consumer Commission) released on 17 April 2023 indicates that Australians suffered $3.1 billion in losses to scams in 2022. That figure is the result of reported scams, with the ACCC anticipating total losses to be significantly higher.

The ACCC’s Targeting Scams report, with data compiled from Scamwatch, ReportCyber, banks and money remitters, revealed that investment fraud accounts for $1.5 billion in losses, closely followed by remote access ($229 million) and payment redirection scams ($224 million).

Scams have become increasingly sophisticated, leading to the average loss reported to Scamwatch increasing from $12,742 in 2021 to $19,654 last year. According to Scamwatch, only 13 per cent of victims make formal reports of scams, owing to embarrassment, guilt or emotional distress.

Scamwatch received 239,237 scam reports last year, 16.5 per cent fewer than the number of reports received in 2021, though losses amassed to $569m, a 76 per cent increase on the previous year’s losses.

The report attributes this in part to scammers using new technology to lure and deceive victims.

ACCC deputy chair Catriona Lowe said, “In the weeks after the data breaches, there were hundreds of reports to Scamwatch, including reports of scammers impersonating government departments and businesses to carry out identity theft and remote access scams.”

Vulnerable people disproportionately affected

People with disability reported financial losses of $33.7 million, a 71 per cent increase compared to 2021. Indigenous Australians also reported losses of $5.1 million (up 5 per cent compared to 2021) to Scamwatch, while the median loss for Indigenous Australian scam victims rose to $754, from $650 reported in 2021. People from culturally and linguistically diverse communities made 11,418 scam reports, which resulted in losses of $56 million, up 36 per cent compared to 2021.

“We are very concerned that people experiencing vulnerability continue to be disproportionally impacted by scams,” Lowe said.

Stephanie Tonkin is the Chief Executive Officer at Consumer Action Law Centre (CALC), a role she took over in January this year following roles with Justice Connect, the Energy and Water Ombudsman and WEstjustice. CALC, based in Melbourne, provides consumer advocacy in addition to providing free, independent legal assistance and financial counselling.

Tonkin says, “The ACCC report showed that the number reported to government was $3.1 billion in scam losses for 2022 alone, but that doesn’t represent the true value. Previous research shows that 30 per cent of people don’t report to anyone, so the number in reality is much higher. Australia is a soft target for scammers. We don’t have a coordinated response across industry to prevent and deter scams from taking place.”

Tonkin points to examples of other nations with a more proactive stance on scam prevention.

“There are other jurisdictions that are taking steps, including the UK, which has a voluntary code of practice – though they’re looking at making it mandatory – whereby banks have to reimburse scams victims for their losses unless gross negligence has occurred.

“In Singapore, there’s an SMS Sender ID registry, which helps to prevent some SMS-based scams in the telco space. We’re focused in on the banks and what they need to do because scams almost always involve an Australian bank account and banking platform, and that’s where the transactions are taking place. The banks are posting windfall profits at the moment, which is hard to swallow considering the cost of living crisis Australians are living through, and yet they’re declining to refund customers who are victims of incredibly sophisticated scams through no fault of their own.”

Banks at the centre

Tonkin points to the payment systems that banks operate as the site for scams to take place.

“When customers fall for incredibly sophisticated scams, we’re saying that banks have got the resources, the data, AI technology already in place to address this, but they need to be incentivised to detect and prevent scams. Laws that force them to reimburse scams victims means they’re financially incentivised to coordinate and develop customer protection.”

Education campaigns that put the onus on individuals and consumers to identify and avoid scams have proven to be ineffective, Tonkin says.

“There’s been various educations out there about scams, including from Scamwatch, but we’ve seen exponential growth in scams. In 2021, it was estimated at $2 billion and now we’re up to $3.1 billion, so if you extrapolate it out [to the present], it’s well in excess of $4 billion. Education campaigns aren’t working, and big banks are pointing the finger and laying the blame on individuals. As we saw in the Four Corners report, ‘Meet The Scammers’, in February 2019, these scammers are multinational corporations with HR departments. They’re impersonating websites, aligning their text messages with the language used in banks’ legitimate texts, or they’re impersonating family member’s voices. This is why the model in the UK has that gross negligence standard, because consumers can’t easily protect themselves when faced with this level of sophistication.”

Tonkin says the Consumer Action Law Centre advises and advocates for clients through pursuing reimbursement through their banks, or through the Australian Financial Complaints Authority.

“The bank responses are a patchwork,” Tonkin says. “Sometimes, if there’s an out-of-character transaction, they pause the transaction and attempt to check in, but in other cases this transfer is made and can’t be clawed back. Our financial counsellors and lawyers have supported clients to make complaints through their banks, then through the Australian Financial Complaints Authority. Without laws mandating reimbursement, it’s hit and miss as to how banks will respond to consumer complaints. Even within individual banks, one decision maker might agree to a reimbursement where another employee has said no. Even the sending and receiving banks can differ in their response. Without mandatory rules, consumers are in a lottery situation.”

A scam for everyone

The most vulnerable victims, according to the ACCC, are older people and those with limited English. But, as Tonkin says, those are the victims who are reporting scams, so the full picture of how wide-ranging the victims are and how much their losses are tallying is unclear.

“The ACCC report showed certain demographics in terms of older people being scammed, but it depends who is and isn’t reporting that they’ve been scammed. What we’re seeing and being told by scam departments in banks is that there’s a scam for everyone.”

The average scam loss can be devastating, especially for older Australians who have retired or are incapable of continuing to work. Tonkin has observed cases where self-funded retirees are losing the funds they were reliant upon for the remainder of their life. Older Australians continue to lose more money than other age groups. People aged 65 and over made the most reports (49,163) and lost more money than any other age group, with $120.7 m reported lost, an increase of 47.4 per cent.

“The ACCC report shows that the average scam loss is $20,000, which is life changing for the people who call our helpline. Self-funded retirees lose their life savings, or they’re subject to living in poverty,” says Tonkin.

Ultimately, Tonkin believes, it is banks that must detect, prevent and protect. The introduction of national laws requiring mandatory reimbursement of bank customers unless there is proof of gross negligence by the customer would be an incentive for banks to take greater measures to oversee transactions, identifying unusual or out-of-character transactions, and to put in place measures to converse with their customers where a transaction might be the result of a scam operation.

People from culturally and linguistically diverse communities were significantly over-represented in terms of financial losses across a range of scam types, accounting for more than one-quarter (27.9 per cent) of total losses associated with identity theft and about a third (32.7 per cent) of all losses to pyramid schemes, the report said. People aged 35 to 44 reported the highest increase in reported losses: up 90.7 per cent to $91.2m.

The ACCC report indicates the major losses are occurring through investment scams, dating and romance scams, false billing, phishing, remote access scams, threats to life, and identity thefts.

Tonkin says, “Investment scams are where the high losses are occurring. It goes back to that point that education doesn’t prevent scams from taking place, especially where they’re so sophisticated. Everyone is digitally literate, but people are busy and constantly online. Someone might click through on a social media platform or via email or text advertising an investment, whether it’s an IPO announcement or a crypto investment. Even dating or games sites can redirect people to an investment scam. This shows how elaborate and resourced scammers are in grooming their victims into making a transfer.”

Tonkin adds, “The government are looking at scams now and Stephen Jones, theAssistant Treasurer and Minister for Financial Services, called a roundtable on scams earlier this year involving us and involving industry, focusing on how we need to ensure Australia isn’t a soft target. Government is consulting in this space, and the problem is urgent, so mandatory reimbursement laws can and should be passed as soon as possible.”