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AFCA opens consultation on Rules changes to expand jurisdiction over receiving banks in scams

Australian Financial Complaints Authority

The Australian Financial Complaints Authority is opening public consultation on proposed changes to the rules that govern its work, with a key focus on expanding its jurisdiction to include the conduct of receiving banks in scam complaints.

The consultation, running from 19 May to 13 June, follows a recent change to AFCA’s authorisation conditions by the Federal Government. The amendments seek to improve the effectiveness and efficiency of complaint handling, improve transparency and lift industry standards, particularly in relation to scams.

A central feature of the proposed changes is the inclusion of receiving banks in AFCA’s jurisdiction when assessing complaints involving scam transactions. This change enables AFCA to investigate the actions of financial institutions that receive funds from scam victims, including the use of mule accounts.

“This amendment is a significant step forward in ensuring that all parties involved in the movement of scam funds are subject to appropriate scrutiny,” said Deputy Chief Ombudsman Dr June Smith. “It promotes fairness, transparency, and accountability of all banking participants in the transaction chain.”

AFCA engaged an external consultant to draft the proposed changes, so they are clear and easy to understand. The proposed Rules changes also include introducing the ability of AFCA to name financial firms who do not comply with its determinations, use of AFCA’s processes by paid representatives and removal of AFCA’s legacy Rules section. The Consultation Paper is available on the Consultation page of the AFCA website and there is an edited draft of AFCA’s Rules that reflects the proposed changes available here.

“AFCA conducts an annual review of its Rules to ensure they remain accurate and up to date. This process is essential for providing clear guidance regarding our jurisdiction and procedures,” added Dr Smith.

“Engaging with stakeholders through the consultation is vital for refining our processes and ensuring we meet the evolving needs of consumers, small business and financial firms. We look forward to receiving valuable feedback that will help us enhance the AFCA scheme.”

Summary of proposed changes

AFCA proposes changes to its Rules in the following areas:

• Consideration of a receiving bank in a scam transaction. This change will allow AFCA to meet its new authorisation condition that was issued by the Minister for Financial Services. That condition enables AFCA to investigate and consider scams involving mule accounts and the actions of receiving banks in scam complaints. This change provides greater fairness, transparency and accountability in dealing with scam complaints. 
• Introducing the ability for AFCA to name financial firms who do not comply with Determinations. Publishing this information increases transparency and assists in ensuring financial firms meet their obligations to comply with a determination, after it’s been accepted by a consumer. 
• Requiring the use of appropriate communication channels by paid representatives. This change will ensure paid representatives use the communication channel required by AFCA, including our consumer portal, when submitting complaints and communicating with us about complaints. Handling these complaints through the most appropriate channel will provide for much more efficient and effective complaint handling.  
• Dealing with paid representatives who are not AFCA members. This proposed change would extend an existing Rule, giving AFCA a further discretion to cease dealing with a complaint where a paid representative is required to be an AFCA member but is not. This will provide important protection for complainants who have engaged a paid representative but are unhappy with the service they provided and wish to make a complaint. 
• Removal of AFCA’s legacy Rules section. AFCA’s legacy jurisdiction has already closed at the end of June 2020, so we propose to remove this section from our Rules. Any open legacy complaints will not be impacted. 

AFCA’s Rules are approved by the Australian Securities and Investments Commission (ASIC) and explained in more detail in the Operational Guidelines (see the Rules and Guidelines web page). AFCA resolves complaints in accordance with those rules and guidelines.

The Consultation page on the AFCA website provides more information on how to submit a response.

 

About us:

About AFCA – The Australian Financial Complaints Authority (AFCA) is a non-government ombudsman service providing free, fair and independent help with financial disputes. AFCA is a one-stop-shop for consumers and small businesses who have a dispute with their financial firm, over things such as banking, credit, insurance, advice, investments or superannuation. Where an agreement cannot be reached between parties, AFCA can issue decisions that are binding on financial firms.

Contact details:

[email protected]