Banks must identify high risk transactions and unusual account activity as part of the updated code of practice. Photo: 123rf
A consumer advocate has described bank changes designed to stop scams as half-baked and lacking in detail.
The Banking Association has updated its code of practice, so banks must introduce pre-transaction warnings, a 24/7 reporting channel and a service for customers to check the name of the person they are paying matches the account number.
They must also identify high risk transactions and unusual account activity and share scammer account information with other banks.
If a bank failed to adequately warn and protect a customer from a scam, they might have to reimburse them up to $500,000.
The Banking Association said the changes would help to protect customers and provided a clear compensation scheme if they were ripped off.
Campaigner Janine Starks told Nine to Noon the suite of scam protections still fell short compared to places like the United Kingdom.
"We've definitely made some progress but I'm a consumer advocate and I'm not here to say 'well done' to what I call a little bit of a half-baked scheme here with lots of wriggle room in it," she said.
Starks was concerned banks could choose how they interpreted and acted on the new changes.
The Banking Ombudsman Scheme received 949 cases last financial year with the average loss at $80,000 - up from $57,000 the year before.
Starks said one common scam was someone impersonating a bank and telling a customer their account was under attack and they needed to move their money.
"There should be a clear signal within internet banking that says 'we are not on the phone to you'. That would be an indication that that's not your real bank you're talking to'," she said.
It was a protection her UK bank offered.
"That would be a protection that I would expect to see before a bank could refuse repayment or compensation on a bank impersonation scam."
Banks could and should do more but didn't want to potentially have to cough up more money to pay back scam victims, she said.
Starks was pleased to see the reimbursement amount raised, but said a new clause meant if people were prone to scamming, they would not be protected after being scammed three times.
Significant measures
New Zealand Banking Association chief executive Roger Beaumont described the changes as a massive achievement for the industry that would help to protect customers.
He disagreed with Starks description of them being "half baked", saying the Commerce Minister was delighted with the changes and the Banking Ombudsman welcomed them.
They were significant measures that would require a massive amount of work to put in place across 13 retail banks, he said.
The commitments gave banks a clear baseline but didn't mean banks were not already doing more or wouldn't add more protections in place, Beaumont said.
The new measures would help customers, who might have been tricked into paying a scammer, to pause and make sure they were confident before clicking send funds, he said.
"When you think about what we call the ecosystem of a scam, scams typically start when a scammer gives money to a social media company or a big global tech company to promote their scam," Beaumont said.
"One of the important things that needs to happen is that those companies need to stop those things at source and stop taking the ads to promote the scam.
"Banks are at the end of the chain when the payment leaves customer's account."
The updated code kicks in from the end of November to give banks time to roll out the protections.
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