On November 30, 2023, the Assistant Treasurer, the Hon Stephen Jones MP, and the Minister for Communications, the Hon Michelle Rowland MP, unveiled a proposed Scams Code Framework (‘the Framework’) and initiated a public consultation process.

One crucial aspect that goes unmentioned is the role of AUSTRAC.

This financial intelligence agency and regulatory body plays a pivotal role in monitoring and regulating financial transactions to prevent money laundering, terrorism financing, and other financial crimes.

Given that scam proceeds often find their way into the financial system before being transferred overseas, AUSTRAC’s expertise in tracking financial flows is indispensable.

The framework’s objective is to establish a comprehensive and coordinated strategy to combat the growing threat of scams in Australia. While this is undoubtedly a commendable initiative, it raises an important question: where is AUSTRAC in this proposed framework?

This framework draws upon insights gathered from targeted consultations with regulators, industry representatives, consumer groups, and individuals affected by scams, ensuring a well-informed and inclusive approach to tackling this critical issue.

Current anti-scam measures in Australia are disparate, with varying degrees of effectiveness across different sectors and industries targeted by scammers. While some sectors, such as telecommunications, have implemented industry codes to combat scams, others lack specific, enforceable anti-scam requirements.

Furthermore, efforts to counter scams have often been fragmented, residing primarily within individual businesses or sectors, resulting in an uneven application of preventative measures.

In recent years, scams have posed an increasingly pervasive threat to Australian consumers and businesses, resulting in staggering financial losses. In 2022, Australians fell victim to scams amounting to a staggering $3.1 billion, marking an alarming 80 percent increase from the previous year. With approximately 65 percent of Australians exposed to scam attempts, it is evident that scammers are growing more sophisticated, coordinated, and innovative in their tactics, posing a significant challenge for both individuals and the economy.

If you listen to the heads of various Govt departments including recent statements by the chair of the National Anti Scam Centre (NASC) Catriona Lowe we are continually informed that once people lose money to scammers it is generally routed through several Australian Bank Accounts and then ultimately transferred overseas.

So $3.1bn is a large number and in reality the actual amount is north of $9bn and its generally sent overseas, and if so then it can be argued that it is actually being used for terrorism financing, and if that’s the case why is Austrac not an integral part of the proposed new Mandatory Scams Code?

Criminals often use sophisticated techniques and strategies to disguise the illicit origins of funds and transfer them across borders. Here are some ways in which scam money can be moved overseas relatively quickly:

1. Offshore Accounts: Scammers may open offshore bank accounts in countries with lax financial regulations, making it easier to move money discreetly.

2. Cryptocurrencies: Digital currencies like Bitcoin can be used to transfer funds across borders quickly and anonymously. Criminals may convert scam proceeds into cryptocurrency to hide their tracks.

3. Shell Companies: Fraudsters may set up fake businesses or shell companies to make it appear as though the money is coming from legitimate sources, facilitating international transfers.

4. Money Mules: Criminals may recruit individuals as money mules to transfer funds on their behalf. These individuals are often unaware of their involvement in illegal activities.

5. Hawala System: Some criminals may use informal money transfer systems like hawala, which operate outside of traditional banking channels and can facilitate cross-border transfers.

6. Complicit Financial Institutions: In some cases, corrupt or complicit ‘international’ financial institutions may facilitate money laundering by turning a blind eye to suspicious transactions.

It’s important to note that AUSTRAC and other regulatory authorities are actively working to combat money laundering and financial crimes, but it’s challenging to prevent every instance, especially when scammers continually adapt their tactics.

Recognizing the urgent need for a more comprehensive and coordinated approach, the Australian Government has embarked on a mission to establish a robust regulatory framework to combat scams effectively. This framework aims to delineate the roles and responsibilities of government bodies, regulators, and the private sector in addressing scams, with a primary focus on banks, telecommunications providers, and digital platforms.

The Australian Government has already introduced several initiatives aimed at reducing scam activity and mitigating its impact:

1. National Anti-Scam Centre (NASC): Launched on July 1, 2023, the NASC, led by the Australian Competition and Consumer Commission (ACCC), aims to enhance intelligence sharing across government and private sectors. This initiative also seeks to raise public awareness about scams, promoting collective efforts to prevent them.

2. ASIC’s Crackdown on Investment Scam Websites: ASIC has been actively involved in identifying and taking down investment scam websites, resulting in the removal of 2,500 websites since July 2023.

3. ACMA’s SMs Sender ID Registry: The Australian Communications and Media Authority (ACMA) is working to establish Australia’s first SMs sender ID registry. This registry will help prevent scammers from impersonating trusted industry or government brands in text message headers, protecting consumers from deceptive practices.

4. Support Services for Victims: Specialized support services have received funding to assist victims of identity theft, providing them with the necessary assistance and guidance.

Despite these efforts, it is crucial to recognize that current regulations primarily target telecommunications providers, who are governed by the Reducing Scam Calls and Scam Short Messages (SMs) Code. This industry-developed code, registered and enforced by the ACMA, mandates that telecommunications providers take reasonable steps to prevent and block scam calls and text messages. While this has led to substantial reductions in scam calls and consumer reports, it also highlights the adaptability and sophistication of scammers.

Additionally, regulators such as the ACCC, the Office of the Australian Information Commissioner (OAIC), and ASIC can offer consumer protection, privacy oversight, and financial system regulation. However, there are currently no specific requirements in place for banks and digital platforms to address scams which is why the framework is being proposed.

Recent assessments have identified gaps in the approaches of banking and digital platform sectors in preventing, disrupting, and supporting victims of scams:

– The ACCC’s 2022 Digital Platform Services Inquiry (DPSI) interim report highlighted the inadequate efforts of digital platforms in protecting consumers from online harms, including scams. Recommendations included mandating measures to prevent and remove scams, verifying user identity, and transparently reporting on scam mitigation efforts.

– ASIC’s 2023 findings revealed inconsistencies and gaps in the strategies and governance of Australia’s major banks regarding scams. This indicates a need for more mature and comprehensive approaches to scam detection, response, and victim support.

On November 24, 2023, the Australian Banking Association Ltd (ABA) responded to these challenges by launching an industry-led ‘Scam-Safe Accord.’ This initiative outlines a series of anti-scam measures to be implemented across the banking sector. These measures include the introduction of a confirmation of payee system, enhanced customer protections, intelligence sharing, and efforts to restrict high-risk payment channels, among other initiatives.

The proposed Scams Code Framework is a significant step toward creating a more resilient and coordinated defence against scams however in my view it cannot occur in isolation of the AML/CTF regulator Austrac.

As we endeavor to protect Australian consumers and businesses from the scourge of scams, we must ensure that all relevant stakeholders, including AUSTRAC, are actively engaged in this battle. Only through a holistic approach that addresses both the tactics of scammers and the financial channels they exploit can we hope to curtail the growing threat of scams and protect the financial integrity of our nation.

In conclusion, AUSTRAC’s involvement in the proposed Scams Code Framework is not a mere option; it is a necessity. We call upon the Australian Government to ensure that AUSTRAC is an integral part of this initiative, as their expertise is indispensable in the fight against scams and the preservation of Australia’s financial security.