Financial Crime World

Fraudulent Activities in Online Payments in New Zealand: Minister’s Open Letter to Banking Industry Sparks Action

New Zealand’s Minister of Commerce and Consumer Affairs, Hon Andrew Bayly, has issued an open letter to the country’s banking industry, urging immediate and concerted action to combat scams and online fraud. The letter highlights the proliferation of these activities, which cost New Zealanders nearly $200 million in 2023, and emphasizes the need for further measures to protect customers.

Minister’s Requests

The Minister’s letter requests several specific actions from the banking industry, including:

  • Introduction of a confirmation of payee system: By the end of 2024, banks will check that bank account names and numbers match before allowing electronic transactions.
  • Investigation into a voluntary compensation scheme: Banks will investigate a scheme to compensate customers for authorized payment scam losses unless they have been grossly negligent.
  • Update of the industry’s voluntary Code of Banking Practice: The code will be updated to include better customer protections within the year or consider options for a regulated mandatory code.
  • Development of other initiatives and systems: Banks will develop additional measures to protect consumers from online scams and fraud.

Banking Industry Response

The banking industry has responded swiftly, confirming that it will introduce a confirmation of payee system this year and investigate a voluntary reimbursement scheme. The industry is also implementing various measures to further protect customers, including:

  • Awareness campaigns: Banks are launching awareness campaigns to educate customers about online scams and fraud.
  • Removing hyperlinks from texts: Banks will remove hyperlinks from text messages sent to customers to prevent scammers from using them.
  • Supporting the establishment of an anti-scam centre: The industry is supporting the development of a national anti-scam centre to combat fraud.
  • Fortnightly meetings: Chief executives will meet fortnightly to discuss fighting scams and share best practices.

Expert Recommendations

However, experts argue that there are several steps the Government could take to combat scams and online fraud, including:

  • Appointing a lead Minister and government agency: A single point of contact is needed to coordinate efforts going forward.
  • Supporting the evolution of the banking industry’s national anti-scam centre: The Government should provide resources to support the development of this centre.
  • Encouraging telecommunications providers and digital communications platforms: These companies should take further steps to combat fraud, such as implementing better security measures.
  • Working with regulators in other countries: New Zealand can learn from best practices in other countries and collaborate with them to combat fraud.

Establishing an Anti-Fraud Centre

The New Zealand Government should also consider establishing a similar anti-fraud centre like Australia’s, which works to disrupt scammers, raise consumer awareness, and assist scam victims.

MinterEllisonRuddWatts, a leading law firm in New Zealand, provides legal advice, risk assessments, and compliance recommendations to help clients understand and navigate laws and regulations related to scams and online fraud. The firm conducts investigations, handles litigation, and negotiates contracts to protect clients from fraudulent activities.