Australian banks claim 40% of scams ‘touch’ crypto as it defends restrictions
2023-06-27
During a panel at the Australian Blockchain Week, executives from Australia’s major banks explained why they added restrictions on payments to local crypto exchanges.
Australia’s cryptocurrency industry banking woes will likely continue, with the government and major banks signaling no intention to back down against scams that “touch” crypto.
During a panel at the Australian Blockchain Week on June 26, Sophie Gilder, managing director of blockchain and digital assets at Commonwealth Bank (CBA) shed light on the bank’s restrictions on crypto exchange payments, noting it was put in place after seeing an alarming rate of scams that ended up involving cryptocurrency.
“One in three of the dollars that are scammed from Australians touch crypto, one in three. So it’s the single largest lever that we have to reduce this impact on our customers,” she said.
Nigel Dobson, banking services portfolio lead at ANZ, referred to data from the Australian Financial Crimes Exchange suggesting that the figure may be even higher, at 40%.
On June 8, CBA followed Westpac’s lead in imposing pauses, limits and outright blocks on certain payments to cryptocurrency exchanges, both citing an increasing threat of investment scams. Australia’s other two major banks, ANZ and NAB, have not yet indicated whether they would impose similar restrictions.
A Treasury official confirmed that the moves so far have come at the banks’ own “volition” but that both the banks and the government have a “shared view” that cryptocurrency scams are “unacceptably high” at the moment.
“From the government’s point of view, [they] need to invest more in reducing scams, and that’s the government, but it’s also banks; other people in the financial system have to work together to reduce scams to maintain trust in the system,” said Trevor Power, the Australian Treasury assistant secretary.
The bank’s decision has continued to meet criticism from Australian crypto exchange customers. Australian lawyer and senior research fellow at the RMIT Blockchain Innovation Hub Aaron Lane has defended the banks’ actions, however.
“Banks and other financial institutions are under increasing pressure to tackle the growing problem of scams involving cryptocurrency. Imposing time delays, declining transactions, and placing deposit limits are all mechanisms for banks to retake control and limit their legal and regulatory risks.”
While these measures “may not be ideal” for Australian-based crypto exchanges and their customers, Lane said that a “risk-based approach is better than outright debanking.”
According to the Australian Competition and Consumer Commission, Australians lost 221.3 million Australian dollars ($148.3 million) from investment scams where crypto was used as the payment method in 2022 — a massive 162.4% increase from 2021.
Power concluded that crypto remain a “significant vector” for scams in Australia, which calls on both banks and the government to clamp down on the sector.
CBA seeks ecosystem approach to target scams
Jun 28 2023 12:08PM
“Banks alone can’t fix this problem”.
The Commonwealth Bank’s head of blockhain has called for a “whole of ecosystem” approach to dealing with scams.
Sophie Gilder, who also leads the bank’s digital assets work, said that consumer protection responsibilities don’t only rest with the banks, and that the wider economy had a role to play.
“Banks alone can’t fix this problem,” she said.
“These problems start typically in social media or telcos, and banks are used for one of the vehicles for shifting value.”
Payment providers, social media operators, telcos and cryptocurrency exchanges should band together with banks to confront the challenge of rising scams, she argued, noting that each’s scam prevention measures varied.
Speaking at a Sydney Blockchain Week event, Gilder added industries “need to be sharing data” and “all meeting minimum standards.”
“We need legislation that allows us to actually share that data because at the moment we are actually prevented from doing that,” she said.
Gilder said it “would be incredibly useful” to be able to “work together in a more efficient manner”, adding law enforcement need “to have the appropriate powers to act.”
“In order to reduce friction, we need to make Australia a much tougher target for scammers than it is today,” she said. “At the moment, it is just too attractive.”
Already CBA has introduced some measures intended to prevent customers from completing potentially fraudulent transactions via cryptocurrency exchanges, by holding or declining payments for 24 hours.
Gilder said across 2022, Australians lost roughly $3 billion to scams, which the ACCC recorded as an 80 percent increase on total losses compared to 2021.
Gilder said this number is expected to be higher in 2023.
“Every month, we have about 650 customers who call us – often crying, to be honest – because they have lost their life savings, so it’s a really big problem and there’s a lot more that we all have to do,” she said.
“Banks have to do more, payment service providers have to do more, the government has to do more, social media has to do more, telcos have to do more, and crypto exchanges have to do more.”
Gilder said CBA’s cryptocurrency features “were all databased”, taking into account “what was happening, the evidence, [and] the patterns”.
“We’re going to monitor how effective they are,” she said.
“We believe that’ll reduce both the number and the quantum of scams which occur, but we will be revisiting it.”
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