In a compelling discussion at the INFINZ (Institute of Finance Professionals New Zealand Inc) Conference in Auckland, Westpac New Zealand CEO Catherine McGrath highlighted the ongoing tension between maintaining customer privacy and effectively fighting scammers. McGrath advocated for enhanced information sharing among banks to better identify and prevent fraudulent activities, emphasizing the need for regulatory adjustments to support these efforts.
Balancing Privacy and Fraud Prevention
During a panel discussion with CEOs from New Zealand’s four major banks, McGrath addressed a critical question: “How can the major banks work together to support stopping recurring fraud? When an individual is exited from an institution, they’re able to open another account at another bank with no limitations.”
McGrath responded by illustrating the challenges posed by mule accounts—legitimate accounts that are later exploited for illegal activities. She explained, “Somebody can have an entirely legitimate account that works normally for a long period of time. They leave the country, they sell it to somebody else, suddenly this account is no longer legitimate. What you tend to find is you might get patterns of those accounts under similar names at different banks. At the moment, we’re not allowed to share that information.”
Advocating for Increased Information Sharing
McGrath emphasized the limitations current regulations impose on banks, preventing them from sharing detailed information about suspicious accounts across institutions. “We’re not allowed to say, ‘Catherine McGrath has a dodgy account at Westpac. So please look at all the other Catherine McGrath accounts at the other banks and put them on watch,'” she stated. McGrath advocated for regulatory changes that would allow banks to share more comprehensive information about suspicious activities while still respecting customer privacy.
Privacy Commissioner’s Response
Privacy Commissioner Michael Webster addressed McGrath’s comments, noting that the Privacy Act permits the use and disclosure of information when there is a compelling public interest. “We have not yet had this specific issue about account patterns raised with us, but we can provide our views about how to best navigate privacy and account security concerns if this has now been identified as a potential weakness,” Webster said. He recommended conducting a privacy impact assessment to identify and mitigate any privacy concerns related to enhanced information sharing.
Collaborative Efforts to Fight Scams
The panel also featured ASB CEO Vittoria Shortt, who stressed the importance of involving various industries in the fight against scams. Shortt highlighted incidents where fraudulent activities exploited platforms like Facebook Marketplace, underscoring the need for collaboration with technology companies to swiftly address and dismantle scam operations.
“I had an incident where a crim set up a website purporting to be ASB. Now I need to get that taken down. I need to talk to Google, but that’s too slow,” Shortt explained. She called for faster and more effective mechanisms to combat online scams, emphasizing that no single entity can tackle the issue alone.
Upcoming Measures to Enhance Security
In response to these challenges, banks announced plans to roll out a confirmation of payee service in November as part of their ongoing war against scams. This service aims to verify the identity of recipients during financial transactions, reducing the risk of fraudulent transfers.
Conclusion: A Call for Regulatory Evolution
Catherine McGrath’s insights at the INFINZ Conference highlight the urgent need for regulatory evolution to empower banks in their fight against fraud while safeguarding customer privacy. By fostering greater information sharing and collaborative efforts across industries, New Zealand’s banking sector can enhance its defenses against increasingly sophisticated scam tactics, ensuring a safer financial environment for all.
