Westpac says privacy laws prevent banks from responding adequately to financial abuse

Privacy laws are limiting banks’ ability to effectively deal with financial fraud cases, Australia’s second-largest bank has told a federal inquiry.

The Joint Parliamentary Committee on Corporations and Financial Services is examining the effectiveness of current rules and the role banks can play in identifying and preventing different forms of financial abuse.

The committee met in Adelaide for its third day of public hearings on Tuesday and heard for the first time from two Westpac representatives who said the privacy laws were too restrictive.

Adrian Ahern, Westpac Group Customer Advocate, told the committee about a recent case of fraud which was detected through Westpac’s internal alert system.

“We had a client who appointed her son as her attorney, and over the last few weeks he transferred $150,000 in three or four instalments from his mother’s account to his account,” Mr Ahern told the committee.

“We managed to speak to our client, his mother, she said she had no right to the money, so we revoked or suspended his access to his mother’s account, took the funds from his account and returned them to her account and then suggested she seek legal advice on revoking her power of attorney.”

Mr Ahern said the bank should be able to report such cases to other financial institutions, authorities and services.

Customer Advocate Adrian Ahern told the committee about the case of a mother whose son was withdrawing money from her account.(ABC news)

“This is a perfect example of the kind of circumstance we would like to be able to report to an adult protection authority who could objectively obtain all the facts, investigate them and take action, but as many of the submissions made as part of the investigation have found, the Privacy Act prevents us from doing so.”

“We talked to (his son) and he said, ‘oh, I’ve been appointed power of attorney, mum’s got some spare money, I thought I could take it and it wouldn’t be a problem,’ so maybe there’s some issue with power of attorney education,” Mr Ahern said.

The investigation found that if the woman’s son had transferred the money to another bank account, Westpac would not have been able to recover it.

“We actually wouldn’t be able to get that money back because under privacy laws we can’t contact another institution to find those funds or withdraw them,” Lisa Pogonoski, general manager of customer solutions, told the committee.

The cheating system could be a good model to replicate

Ms Pogonoski told the committee that the highly sophisticated framework for cooperation between banks to combat fraud and unfair financial activity had not yet been replicated in the context of dealing with financial abuse cases.

“The analogy to fraud is interesting because we actually have a fairly developed ecosystem between banks that allows for messages to be sent between banks and funds to be pursued effectively,” Ms. Pogonoski said.

“By recognizing fraud and scams as a crime, and scams as a serious social problem, that ecosystem has been built, we don’t have a similar ecosystem yet for financial fraud.”

Westpac Customer Solutions general manager Lisa Pogonoski says privacy laws make it difficult to resolve some fraud cases.(ABC news)

Ms Pogonoski said this creates “blind spots” that perpetrators can exploit.

“Similarly (to fraud), we have a situation where customer money flows out of the sight of a single bank and there is no way to recover it through the banking network,” she said.

“In fraud cases, we are trying to solve a complex puzzle with many missing pieces.”

She added that the bank would support legislative reform to close these gaps.

“There are a lot of information gaps that make it a challenge for banks to identify fraud. I don’t like the term ‘blind spots,’ but that’s what they are,” she said.

“Having access to vital information enables us to identify fraud risks more quickly, so we can deploy our specialist care teams, and that’s when we are at our best.”

Alarm system identifying perpetrators

Mr Ahern told the committee that Westpac had recently introduced enhanced monitoring of customer accounts using powers of attorney, which had proven useful in detecting instances of financial fraud.

“Since then we have had about 150 alerts a day, which may seem like a lot, there are a lot of false alarms in that, but we prefer to cast a wide net rather than have a narrow net,” Mr Ahern said.

The commission met at Adelaide Town Hall on Tuesday and moved to Perth on Wednesday.(ABC news)

“We go from having 150 alerts every day to investigating a handful, maybe four or five, and we go from that to maybe one or two every few days where we have to do a lot more work and make contact.”

Ms Pogonoski told the inquiry that the bank, which has almost 11 million customers, employs a team of 1,400 customer service specialists, 290 staff in the difficulties team and 54 specialists who deal with “more worrying cases”.

On Tuesday morning the committee met with several members of Westpac’s specialist team in Adelaide.

“Our motto is to provide help and care at important moments, and this care is crucial when a client experiences family and domestic violence or financial abuse.”

“We’ve definitely seen an increase in the number of clients who are having issues with fraud and financial hardship,” Ms Pogonoski told the committee.

“Yesterday I spoke to one of our frontline team members, Sandy, who received an emergency call from a customer who was requesting a loan repayment be reversed,” Ms Pogoniski told the committee.

“She desperately needed money for food and gas as she and her children were fleeing domestic violence.

“Sandy confirmed the customer’s email was secure and then promptly provided food and petrol vouchers and referrals to local support services.”

“So far this year we have helped around 3,000 clients experiencing financial abuse, the majority of whom were women, and all of whom had suffered emotional or physical harm.”

“This team is our best of the best, every member has a wealth of experience and a passion for helping people and I would endorse the ability and compassion of this team more than any other service of its kind in Australia.”

Chairwoman Senator Deborah O’Neill asked the committee about the impact of branch closures.(ABC news)

Bank asked about impact of branch closures on vulnerable communities

Senator Deborah O’Neill questioned Westpac about the impact branch closures were having on remote communities where vulnerable people live, arguing that a shift from brick-and-mortar banking to online banking had allowed fraud to “flourish”.

The commission heard that more than 400 facilities had closed across Australia, including 122 in regional and remote areas, with the number of facilities falling by a total of 37 per cent since 2017.

“The physical reality of human interaction is something we have not lost sight of as an important factor in fraud prevention,” Senator O’Neill said.

“Fraud witnessed by someone on your bank’s network is an opportunity for Westpac or any bank to intervene, rather than waiting for the person in the fraud situation to actually call the agency to get involved, there is a potential outlet that has now been evaporated for many banks.”

Ms Pogonoski told the committee that Westpac staff were trained to identify “customer vulnerabilities”.

“The data we have does not show us that there is a correlation between branch closures and the absence of fraud from an organisational perspective,” Ms Pogoniski told the committee.

“I would like to be reassured by that, but many of the submissions to this committee question that,” Senator O’Neill responded.

Senator O’Neill also asked Ms Pogoniski about the sanction imposed on Westpac by the banking regulator over its decision to close its remote Tennant Creek branch in the Northern Territory.

“We recognise that the closure of Tennant Creek was outside of our normal practices, we had concerns for the safety of our people, so that was our primary concern,” Ms Pogonoski said.

“We recognise that on reflection we could do a better job, we could engage the community more, so we continue to look at how we can support Tennant Creek by providing access to services, but we certainly recognise that on reflection we could do more.”

Earlier this year, Westpac reversed its plan to close eight regional branches across Australia.(ABC News: Brendan Esposito)

Senator O’Neill also raised the issue of barriers to opening bank accounts for some Indigenous Australians because they cannot obtain a birth certificate or provide the required 100 pieces of identification.

Ms Pogonoski said Westpac had an Indigenous team actively working on these issues and looking at ways to improve connectivity with Indigenous communities, especially in circumstances where access to mobile phone and internet services was limited.

The inquest, which has been held in Canberra, Melbourne and now Adelaide, will move to Perth on Wednesday.

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