$50 Million Penalties Loom for Companies Allowing Scams Under Proposed Australian Law

A proposed new code aims to stop Australians losing almost $3 billion to scammers as they did last year.

Illustration by The Epoch Times, Shutterstock

Companies that allow scammers to operate could face penalties of up to $50 million ($33.4 million) and be forced to compensate victims under a proposed new law.

According to the Australian Competition and Consumer Commission (ACCC), more than 601,000 scams were reported in 2023—a record number and an increase of 18.5 percent on the previous year, costing victims $2.74 billion.

Scam Watch reports people have lost at least $159 million to 164,111 scams so far this year.

“There clearly needs to be a significant uplift in standards and protections,” said Minister for Financial Services Stephen Jones, who announced the new Scam Code Act.

The Act will oblige companies to follow minimum standards for preventing, detecting, and disrupting scams and responding to and reporting such crimes.

Unlike the UK, where banks are held solely responsible, Australia’s laws will encompass platforms like Facebook, Google, and TikTok, where scams are advertised to unwitting victims.

Telecommunication companies will be forced to crack down on scam messages and phone calls.

“I’m not going to let the social media platforms off the hook,” Jones said. “If they’re taking money to advertise scam content and somebody loses money as a result of that, then there has to be a consequence.

Australian Financial Services Minister Stephen Jones speaks to the media during a press conference at Parliament House in Canberra, Australia, on Nov. 7, 2022. AAP Image/Lukas Coch

“There'll be new obligations on social media platforms in the codes of practice to ensure that they’re confirming the identity of the people who are advertising on those platforms to ensure that the criminals don’t have an easy means of publishing their fake investment materials,” he said.

Anyone who loses money in an online scam can seek compensation from the advertising platform or a telco, as well as both the sending and receiving banks. The Australian Financial Complaints Authority (AFCA) will handle cases.

Response to the Move

The Australian Banking Association (ABA) welcomed the move.

“Australia has made progress, with scam losses falling,” CEO Anna Bligh said in a statement. “However, holding all parts of the scams chain to account is the only way to properly protect the community.

“These codes must address the core problem of people being exposed to scams in the first place. That means ensuring telcos and the social media platforms have strong protections in place to stop scams reaching Australians.”

During a recent parliamentary inquiry, executives from Westpac and Commonwealth Bank accused social media companies of not doing enough to prevent scams.

Consumer Action Law Centre (CALC), CHOICE, the Australian Communications Consumer Action Network (ACCAN) and Super Consumers Australia have all welcomed the announcement.

“The impact of scams runs beyond the billions in annual losses that customers are left to bear, and scam victims want to see the Government action on scams that has been promised,” CALC CEO Stephanie Tonkin said.

“People who fall through the gaps need a clear and simple pathway to redress. We are pleased to see there will be a single door for dispute resolution ... making navigating disputes somewhat simpler for consumers.”

Super Consumers Australia wants to see people’s superannuation specifically covered by the protections.

“Given that superannuation is often Australians’ most significant asset after their own home, it is a prime target for scammers,” said the organisation’s Policy Manager, Rebekah Sarkoezy. : We urge the Federal Government to designate the superannuation sector as the next area of focus under the Scams Prevention Framework ... to ensure Australians’ retirement savings are protected.”

Existing Systems Working: Ombudsman

The Telecommunications Industry Ombudsman says the existing dispute resolution system is working adequately.

“If you have a problem with your phone or internet, you go to the Telco Ombudsman. When you have a problem with your bank, you go to AFCA,” Ombudsman Cynthia Gebert said.

“This process is simple, it is easy, it is accessible. People just want their problems fixed. The government’s proposed solution complicates what is an easy process for people.”

In addition to those mechanisms, consumers can lodge a case with AFCA, but Jones did not clarify how the expanded powers will make it easier to seek compensation.

Tech companies, including Meta, Google, Snap, TikTok, and Yahoo, have tried to avoid having a statutory code imposed by releasing their own Australian Online Scams Code, which imposes voluntary rules on companies.

But the government says this is not enough.

“I don’t believe they are in line with community expectations or government expectations,” Jones said.

When the “Hi Mum” scam spread last year, and people received texts pretending to be children who lost their phones, it took more than six months for the industry to clamp down on the problem, leading to total reported losses of $2.6 million.

Consultation on the exposure draft of the Scams Prevention Framework opens Sept. 13, and will run for three weeks, during which written contributions are welcomed.