Reported scam losses have surged by nearly 30% in the first five months of this year compared to the same period in 2024, according to data from Scamwatch. This alarming increase leaves behind a trail of victims like Katrina Qian, who feel abandoned by their banks in their efforts to recover substantial financial losses. Qian, who recently moved to Sydney, fell victim to a scam when a caller posing as a government official requested her bank details to supposedly halt suspicious transactions.
Qian, a 44-year-old Mandarin speaker, had accounts with four banks, but only her HSBC account was compromised. The fraudsters managed to siphon off nearly $50,000 by converting it into British pounds and transferring it overseas without triggering any alerts from the bank. Initially, HSBC refused to compensate Qian, citing her disclosure of passwords as the reason for their non-liability. The bank also claimed that the IP data for the new account matched her known addresses, though they did not provide her with these records.
Legal and Regulatory Challenges
Since Qian’s ordeal, the Australian Financial Complaints Authority (AFCA) ruled against HSBC in a significant case, holding the bank liable for a $47,000 scam loss despite the victim sharing passcodes with the scammer. Additionally, the Australian Securities and Investments Commission is suing HSBC’s Australian subsidiary for systemic failures in scam prevention, which HSBC denies. Despite these legal challenges, when Qian sought reimbursement again, HSBC offered only a $9,500 “goodwill” payment, which she reluctantly accepted.
HSBC Australia reported customer losses of $18 million due to impersonation scams in the 2023 financial year and $24 million in the first nine months of 2024. Court documents reveal around 950 reports of unauthorized transactions were made to HSBC Australia from January 2020 to August last year. However, the bank has not disclosed how many affected customers received full reimbursement. AFCA’s interventions have led to $8.7 million being paid to approximately 400 victims, indicating many more, like Qian, remain uncompensated.
Expert Opinions and Consumer Advocacy
David Niven, a seasoned consumer lawyer, expressed concern over HSBC’s handling of scam disputes, noting that many customers settled for modest sums. “The bank played it very hard in the dispute resolution space. It was combative,” Niven stated, urging the bank to apologize and fully compensate affected customers.
Stephanie Tonkin, CEO of the Consumer Action Law Centre, criticized Australian banks for typically reimbursing only a small fraction of scam losses. She highlighted cases where victims were pressured into accepting “lowball” offers and signing non-disclosure agreements. Tonkin also pointed out a case where a victim had to retract media statements as part of a settlement.
Legislative and Technological Solutions
Australia’s “world-first” scam legislation passed in February but has yet to be implemented. The financial services minister’s office has not specified when the laws will take effect, though they were expected to roll out mid-year. Tonkin expressed concern that the laws may not be enforced until 2027 or later, leaving the Scam Prevention Framework inactive.
An AFCA spokesperson emphasized the need for mandatory industry codes and proactive measures from banks. “The use of confirmation of payee technology is a good example,” they noted, adding that scams could be prevented if all banks adopted this technology. The spokesperson also highlighted issues with “mule accounts,” where banks failed to verify the identity of account openers, complicating investigations.
In a similar case, HSBC was implicated when a scammer targeted Jane Wallace’s elderly father, using an HSBC account to transfer $75,000 overseas. HSBC denied liability, arguing the account was opened without the victim’s consent, thus absolving them of responsibility.
The ongoing challenges faced by scam victims underscore the need for more robust protections and accountability within the banking sector. As legislative and technological solutions remain in limbo, the pressure mounts on financial institutions to enhance their fraud prevention measures and support victims in recovering their losses.
