Australia safe from NZ banking code: ABA

The Australian Bankers Association says it won't be following New Zealand's lead after its Kiwi peer opted to make users of online banking held liable for Internet fraud.Earlier this month, The New Zealand Banking Association introduced its 2007 Banking Code of Practice, which leaves customers potentially liable for losses when cheated of their funds by online fraudsters.

The Australian Bankers Association says it won't be following New Zealand's lead after its Kiwi peer opted to make users of online banking held liable for Internet fraud.

Earlier this month, The New Zealand Banking Association introduced its 2007 Banking Code of Practice, which leaves customers potentially liable for losses when cheated of their funds by online fraudsters.

If customers of New Zealand banks fail to update their operating system, antivirus, firewall, anti-spyware and anti-spam, or if they fail to follow procedures outlined by the bank, they may find themselves liable if they fall victim to Internet banking fraud.

The changes also allow Kiwi banks to request access to customers' computers to verify standards have been met in cases of fraud. The code states: "If you refuse our request for access then we may refuse your claim."

The Australian Bankers Association, members of which include ANZ, Commonwealth Bank (CBA), National Australia Bank (NAB) and Westpac, has said it has no such plans to follow New Zealand's lead.

"The banking sector will continue to protect customers from fraud losses related to Internet banking," the ABA said in a prepared statement.

"The ABA does not believe there is any reason to change the existing provisions regarding liability," the association said. "The current regime protects the consumer. Account holders are not liable for losses resulting from unauthorised transactions where it is clear that the user has not contributed to the loss.

"It is very important for our bank customers to have faith in the security of the system, and for that reason we have stuck with our existing position," the statement said.

The Australian Securities and Investments Commission (ASIC) proposed a re-think of the liability issue earlier this year as part of a revision of the EFT (Electronic Funds Transfer) Code of Practice.

In its consultation paper, ASIC stated that "some industry representatives have proposed that users could potentially be made liable under the EFT Code for the full amount of losses from malicious code compromises of account access data unless they have 'minimum' (or sometimes 'adequate') equipment security."

Most submissions to this consultation paper, made by victims of fraud, legal and law enforcement agencies and a handful of banks (including ANZ and Bendigo), forwarded arguments to maintain the status quo -- suggesting that banks were better resourced to fight online fraud than consumers.

While it made its submission months after ASIC's deadline, the ABA also opted not to press for change.

A spokesperson for ASIC said the regulator is currently in the process of re-drafting the EFT code, and won't comment on whether any changes regarding liability were in it. "There will be further public consultation on the re-drafting of this code," the spokesperson said.