Australian banks explain why they restricted payments to local crypto exchanges

Due to the restrictions, many Australians have lost access to online banking since banks label them as victims of crypto scams

Sydney landscape
Australians find online banking difficult to use due to crypto restrictions

Yesterday, during the Australian Blockchain Week 2023 panel, executives from Australia's largest banks commented on the restrictions on bank payments to cryptocurrency exchanges introduced in early June.

It appears that banks are particularly concerned about the extent to which fraudsters are abusing cryptocurrency. Sophie Gilder, managing director of blockchain and digital assets at Commonwealth Bank (CBA), said "One in three of the dollars that are scammed from Australians touch crypto, one in three. So it’s the single largest lever that we have to reduce this impact on our customers."

Nigel Dobson, the head of the banking services portfolio at Australia and New Zealand Banking Group (ANZ), cited figures from the Australian Financial Crimes Exchange, claiming that as much as 40% of illegally acquired money comes from cryptocurrency.

Trevor Power, the Australian Treasury assistant secretary, emphasized the importance of cooperation between the government and banks to "reduce scams to maintain trust in the system."

The trial of fraud protection measures began at Westpac on May 18. The bank then introduced a series of anti-scam practices.

"Customers are alerted to a potential account name mismatch for first-time transfers to a new payee, or where money is being sent to an account Westpac has never transacted with before, for payments made via the New Payments Platform (NPP)," the bank explained the principles behind one of these measures, known as Westpac Verify. In addition, the new feature pauses payment for four hours to allow customers to verify the accuracy of payment details.

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The bank also introduced dynamic CVC, available for the users of a Digital Card in the Westpac app, which offers daily changing three-digit security codes and "real-time blocking of suspicious online merchants."

Furthermore, Westpac established a dedicated financial crime center, employing five hundred financial crime specialists.

Westpac also mentioned statistics in its announcement, "The latest Westpac data shows investment scams account for approximately half of all scam losses and a third of all scam payments are transferred directly to a cryptocurrency exchange."

The CBA was also one of the first banks to introduce restrictions on payments to crypto exchanges. In its June 8 announcement, the bank said the new measures are created "to help protect customers from scam risks associated with making certain payments to cryptocurrency exchanges."

To combat crypto fraud, the bank decided to reject or temporarily withhold "certain payments to cryptocurrency exchanges." It also mentioned a plan to impose a limit of 10,000 Australian dollars per month, which at the time of publication equaled to nearly $6,700 at press time, on the maximum volume of transactions to crypto exchanges.

James Roberts, general manager of Group Fraud Management Services at the CBA, believes these measures "will help reduce both the number of scams and the amount of money lost by customers."

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"With the incidences of scams increasing and in many cases customers suffering significant losses from being scammed, the introduction of 24-hour holds, declines, and limits on outbound payments to cryptocurrency exchanges will help reduce both the number of scams and the amount of money lost by customers," he said in the announcement.

The scale of losses from cryptocurrency scams in Australia is indeed significant. As per statistics from the Australian Competition and Consumer Commission (ACCC), crypto scams resulted in $148.3 million in losses in Australia in 2022.

However, the effort to address this issue made it challenging for many Australians to use banking services. Many bank customers report instances where electronic banking has been disabled for scam victims.

According to Twitter user Linda Sunshine, the CBA has "decided to go hard against people buying crypto. Commonwealth is understaffed and some departments in Sydney these days are flagging everyone 'you are a victim of scam' block EB."

Linda Sunshine shared the message she had received from CBA after speaking to the bank’s staff in person about the inability to access her online banking services.

"Dear LINDA, thank you for taking the time to speak with us. After considering what you told us, we believe that you may be the victim of a scam," the bank told Linda, adding that her online banking "may be restricted until the bank completes its review."

Despite the negative opinion about the banks’ actions developed by some Australian crypto users, Gilder stressed that these actions are not planned to be an attack on cryptocurrencies in the country.

Read also: Australia considers ban on ransomware payments after a major cyberattack

"It’s not industry-specific. It’s based on data, patterns of behavior, and identifying bad actors. So we do this with normal bank accounts already. So in that way, there are definitely parallels to the work that we already do," she said.

Meanwhile, Australian Blockchain Week 2023, sponsored by Binance AU, Bitget, MasterCard, and Fireblocks, among others, ends on June 30.

"Five days of exclusive online and in-real-life events including a launch, roundtables, live panels, fireside chats, the Fringe Festival, NFT art galleries, afterparties, workshops, debates, labs, and more - in Australia’s biggest national Blockchain Week of the year," the event’s website summarizes this year's agenda.

In addition to the aforementioned representatives of major Australian banks, Blockchain Week 2023 will also feature speakers Gracy Chen of Bitget, Caitlin Long (Avanti Financial Group), Sarah Milby (The US Blockchain Association), Jonathan Hatch (ASIC), Chloe White (Genesis Block), Robbie Ferguson (Immutable), Jonathan Miller (Kraken Australia), Karti Mahendran (Deloitte), and others.