New measures aim to curb online and transaction-based scams
The New Zealand Banking Association (NZBA) has unveiled a wide-ranging set of consumer protections aimed at tackling increasingly sophisticated scam activity.
This as scam losses in New Zealand surged from $18.3 million in 2023 to $25.7m in 2024—the highest annual total and largest year-on-year increase since CERT NZ began reporting in 2017.
The initiative aligns with global best practices and will be rolled out progressively over the next seven months across 13 banks.
The new protections include:
- Pre-transaction warnings for certain payments
- Confirmation of payee service (already rolled out)
- Identification of high-risk or unusual transactions, with the ability to delay or block them
- 24/7 customer scam reporting and rapid response
- Sharing scam account information between banks and freezing funds where possible
Code of Banking Practice to reflect stronger customer safeguards
NZBA confirmed that these measures will form part of an updated Code of Banking Practice, effective November 30. For the first time, banks will be required to compensate scam victims if they fail to meet any of five key scam protection commitments.
“These new scam protection measures are a huge step up in the fight against scams. Banks already do a lot to identify and help prevent scams, and these new measures will enhance tech solutions to help protect customers from increasingly sophisticated scams,” said NZBA chief executive Roger Beaumont (pictured).
“Our banks’ new protective measures will be progressively rolled out over the next seven months, with the final rollout across 13 banks in place by the end of November.”
New compensation framework for authorised payment scams
The updated approach to scam loss compensation is designed to recognise shared responsibilities between banks and customers.
If a bank fails to meet its obligations, it will be required to compensate eligible customers in full or in part, depending on the circumstances.
“Banks are stepping up their customer protections and will be accountable for those measures, but they cannot take on full liability for scam losses that are beyond their control and may, for example, start with a fake ad or chat on social media, or a fake search engine result,” Beaumont said.
Banks also retain discretion to offer compensation even when all commitments have been met and will continue to reimburse customers whose accounts are accessed without their authority.
Examples highlight how compensation will work
NZBA provided three real-world-style scenarios to illustrate how compensation decisions will be applied.
Example one: Investment scam (full compensation)
A customer is tricked into transferring $100,000 to a fraudulent account posing as a term deposit offer. The bank fails to identify the payment as high-risk.
Result: Full compensation, as the bank did not meet its scam protection commitments.
Example two: Bank impersonation scam (no compensation)
A scammer convinces a customer to urgently transfer $50,000 to a “safe” account. Despite warnings and a correct “no match” result from the confirmation of payee check, the customer proceeds.
Result: No compensation, as the bank fulfilled all its scam protection duties.
Example three: Romance scam (partial compensation)
A customer, deceived in an online relationship, sends $50,000 to an unknown third party. The bank misses identifying the transaction as high-risk.
Result: Partial compensation, as the bank failed one of its duties, and the customer also ignored warning signs.
Cross-sector collaboration needed to strengthen defences
Beaumont called on other industries to join the effort, noting that scam prevention must go beyond banking.
“As the government has acknowledged, the scam ecosystem is far broader than just banks,” the NZBA boss said. “To truly prevent scams, a cross-industry and government agency approach is needed. Banks can’t combat scammers on their own.
“We call on other industries such as telcos, social media companies, and global tech platforms to bring in their own scam protection measures. If other industries do so, we can move from a world-class protection system to world-leading.”
