Work needed to prevent online fraud, AIC says

By Shannon Jenkins

August 1, 2019

Photo by Freddie Collins on Unsplash

The Australian Institute of Criminology and the Australian Competition and Consumer Commission have paired up to explore the factors that make people vulnerable to consumer fraud. 

Their study identified areas where policymakers, consumer affairs organisations, police, and financial institutions could improve online fraud-prevention measures and awareness-raising initiatives.

While fraud can have a costly impact on business and government, it can also prove detrimental to its victims, according to the authors of the paper, Catherine Emami, Russell Smith, and Penny Jorna.

“Reducing the risk of online fraud is not the responsibility of Australian governments alone. It requires a collaborative effort between governmental, non-profit and other businesses to educate consumers about how to interact safely with others online,” they said.

READ MORE: Commonwealth staff should be trained to detect fraud, criminologists say


“Interestingly, many of the findings did not demonstrate statistically significant relationships between variables that were expected to have been indicative of vulnerability to consumer fraud,” the report said.

The main reason for victims and non-victims to send money overseas was to pay for goods and services that they had purchased online, with 81.3% of non-victims and 53.2% of victims indicating this was the reason for making the payment. Interestingly, a higher number of victims sent money overseas for the purpose of business transactions compared with non-victims, with 20.2% of victims indicating this was the case, as opposed to only 8.4% of non-victims. A higher number of victims (13.3%) indicated they had sent money overseas to friends they’d met online than non-victims (5.9%), while a whopping 36% of victims reported sending money to people not personally known to them, compared with only 1.6% for non-victims. Other reasons for sending money included overseas investments, computer software repairs, schemes involving individuals posing as friends, online dating fraud, and investment fraud.

Non-victims were more likely to have used internet sites to initially contact the recipients of overseas payments, while victims most commonly used email and phone to contact payment recipients.

Participants were asked whether they researched the person or organisation with whom they were dealing. Surprisingly, more victims (52.3%) said they had researched the entity before they decided to send money, than non-victims (33%). However, the research conducted by victims was “superficial and ineffective in determining risk”, the paper said. 

The study identified the different ways that victims and non-victims transferred money overseas, which could potentially serve as early warning signs. For example, victims of fraud most commonly used money wire transfer, while non-victims most commonly used escrow services such as PayPal. Electronic funds transfer using a bank and credit card transactions were used by both categories.

Victims were also more likely to send large amounts of money overseas. 

The report argued that repeat victims of online fraud can suffer severe consequences, such as financial hardship, and may require medical assistance, such as counselling.

“Little research exists about the specific needs and vulnerabilities faced by repeat victims of online fraud. This research has highlighted several areas of concern for these types of victims,” the paper said.


Programs such as the ACCC’s Scams Disruption Project, South Australia Police’s Operation Disrepair and the WA Department of Commerce’s Project Sunbird — which have all been withdrawn due to limited resources — are needed, the report said.

“Given the large amounts of money lost to online fraud in Australia every year, it may be prudent for such proactive initiatives to be reintroduced in each of the Australian states and territories.”

Financial intelligence collected by the Australian Transaction Reports and Analysis Centre would be useful, and “may need to be shared with a larger pool of entities, including those in the private sector, than is currently permitted”. 

More could be done to enhance education and awareness in identifying possible fraudsters, and would be best undertaken in conjunction with banks and money transfer businesses that have direct contact with potential victims of fraud. Policymakers and the relevant organisations and agencies could produce advice on how to properly research organisations and companies, the report said. They could also give tips on how to use independent online review websites.

There is a need for consumer-protection campaigns and programs to educate and remind individuals of the risks of using money wire transfers when making overseas payments, according to AIC, while money transfer businesses and banks should be asked to provide more detailed information about online fraud and the risks associated with transferring money overseas.

Invasive preventive and disruptive actions, such as allowing financial institutions and remitters to refuse to transfer funds where definitive evidence proves the account holder is being defrauded could also be considered, the authors said.

 Jorna and Smith recently explored fraud in relation to non-corporate Commonwealth entities. In a report released in July, they found that lack of resources and lack of staff have hindered the ability of entities to prevent fraud.

“While education about online fraud has been a priority of Australian governments, more needs to be done to keep people safe while online,” the paper said.

“Online fraud is fast becoming one of the most prevalent and costly crimes of the 21st Century. With more services going online, the factors contributing to some people becoming victims of online fraud need to be determined as well as what can be done to reduce risks of victimisation.

“Education about fraud must also target certain areas, such as identifying false websites, how to identify legitimate websites and, for banks and money transfer companies to be aware when someone may be victim of a fraud. These strategies will help consumers to increase their own awareness of fraud risks and reduce their vulnerabilities.”

AIC noted that further research could verify whether factors that were found to be statistically significant predictors of victimisation in the study remain so once account is taken of their presence before and after victimisation. 

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