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Faces of the victims: The 25 scam casualties who lost $6.7 million to fraud

Author
Lane Nichols,
Publish Date
Sun, 14 Apr 2024, 3:15pm
The faces of some of the banking fraudsters' victims. Photo montage / Guy Body
The faces of some of the banking fraudsters' victims. Photo montage / Guy Body

Faces of the victims: The 25 scam casualties who lost $6.7 million to fraud

Author
Lane Nichols,
Publish Date
Sun, 14 Apr 2024, 3:15pm

Offshore scammers are targeting Kiwis at unprecedented rates, stealing hundreds of millions of dollars each year. A Herald investigation has exposed the scale of the disaster and failures of our banking system. Here are the victims who were brave enough to tell their stories. Lane Nichols reports.

They’re united through deception and part of a $6.7 million club to which no one wants to belong.

These are the faces of the victims who’ve become casualties of a ruthless epidemic of sophisticated scams.

They are diverse in background. Among their ranks are successful business people, retired grandparents, students, a former CEO and aspiring politician, ex-cop, health worker, social worker, counsellor, real estate agent and luxury yacht skipper.

These 25 individuals lost $6.7m combined. Only about $700,000 was recovered.

While there are countless others who have lost millions more, these are the ones who told their stories to the Herald in a bid for accountability and to help prevent more Kiwis falling prey.

Most have complained to the Banking Ombudsman but only a couple have been granted partial compensation. Nine complaints were dismissed while five victim anxiously await official review.

All are wrestling with emotional trauma. Their faith in human nature has been shattered. How do you truly trust anyone again?

On top of the enormity of losing life-changing sums of money, many victims have suffered intense feelings of shame.

Those brave enough to tell their stories publicly have been vilified by critics who assume greed was the sole reason they were taken in.

But these are good, hard-working people. They weren’t looking to line their pockets. They just wanted to do the best for their families.

In an attempt to find a safe investment, they were duped by skilled con artists targeting a banking system that one victim has compared to “Swiss cheese”.

Borja Ares and Alfiya Laxmidhar lost $330,000 in an elaborate Citibank-branded investment scheme. Photo / Michael Cunningham
Borja Ares and Alfiya Laxmidhar lost $330,000 in an elaborate Citibank-branded investment scheme. Photo / Michael Cunningham

Spanish health worker Borja Ares told the Herald he felt he’d failed his wife and children after sending $330,000 to scammers in May last year, believing he was investing the proceeds of a house sale in low-risk bonds with international financier Citibank.

Jo Hurley broke down in tears when her bank informed her the $350,000 she thought was sitting in a secure term deposit had been siphoned to offshore criminals as her husband fought for his life in a hospital intensive care unit.

Tim Michalick lost his family’s $400,000 through an elaborate HSBC-branded investment scam, then learned the person who allegedly received his stolen money was a disbarred lawyer who is now facing 11 money laundering charges.

And NZ First candidate David Wilson said the worst phone call of his life was informing his wife their $200,000 retirement savings were not safely accruing interest with Australian investment firm Macquarie Asset Management, but had been stolen by criminals.

NZ First candidate David Wilson lost $200,000 in an investment scam. He is speaking publicly to highlight failures in the banking system. Photo / Michael Craig
NZ First candidate David Wilson lost $200,000 in an investment scam. He is speaking publicly to highlight failures in the banking system. Photo / Michael Craig

The man with the English accent

Each story is devastating in its similarities, beginning with an online search for investment options.

The cunning tactics employed by the man with the English accent who claimed to be an investment adviser with some hotshot international bank.

His encyclopedic knowledge of the financial sector and “gift of the gab” that allayed concerns and somehow disarmed victims of any nagging doubts.

The glossy prospectus material promising the “over-subscribed” investment opportunity was government-backed - invariably signed by company officials bearing the name of real bank executives for when diligence checks were conducted.

The criminals - based somewhere overseas - had routed calls through software that made it appear they were phoning from Wellington or Auckland.

Money was deposited into a New Zealand “holding account” with a reputable local bank, giving the con another layer of legitimacy, with victims assured their investment was fully refundable during a seven-day “cooling off” period.

But the account was controlled by a local “money mule” who either received a cut for moving the stolen funds on, or was tricked into thinking they were part of a legitimate crypto investment scheme.

Other conduits believed they were helping an online love interest pay international taxes or urgent hospital bills for a desperately sick relative overseas.

The scam victims had to jump through anti-money laundering compliance checks to prove their identities to the thieves stealing their money.

They were then sent log-in details to a fake “client portal” where they could see their imaginary investment earning interest - a tactic to buy time while the money was whisked offshore.

Then everything would come crashing down.

A Northland woman in her 70s who lost $50,000 says it was “very upsetting” to learn she had been scammed.

“I just felt very stupid. How could I have been so silly?

“It definitely changed things. It has changed our way of life.”

The victim says the scammer had a regional English accent from an area where she grew up and it was hard to believe “that guy was a robber”.

The man who defrauded her is “not going to sleep well at night” and will never be satisfied, she says.

“What are you going to do with all that money? It’s not going to bring you happiness.”

Fighting back

But the story doesn’t end there.

As victims began to come forward in late 2022 and early 2023, the scale of the disaster began to emerge.

They realised they weren’t alone.

North Shore real estate agent Carla O’Neil lost $100,000 through the Citibank scam in February last year.

After going public in May, she was inundated with heartbreaking personal messages from dozens of other victims who had been through the same agonising ordeal.

Many were too ashamed to have confided in family and friends, and were suffering alone from trauma and post-traumatic stress.

Drawing strength from their collective experiences, they began co-ordinating as a group to advocate for recognition of their plight and better consumer protections from the country’s banks.

North Shore real estate agent Carla O'Neil lost $100,000 in a Citibank scam. She has been co-ordinating a victims group to advocate for change in the banking system. Photo / Michael Craig
North Shore real estate agent Carla O'Neil lost $100,000 in a Citibank scam. She has been co-ordinating a victims group to advocate for change in the banking system. Photo / Michael Craig

All had reported the criminal offending to authorities, but were invariably told the chances of recovering their life savings were slim to none. As the money had been moved offshore, police said they had no jurisdiction. The criminals were untouchable.

Most victims received “final response” letters from their banks offering “sympathy” for their loss but refusing liability as the customer had “authorised” the payments and banks were duty-bound to carry out their instructions.

There was one due diligence check victims didn’t make - calling the company direct to check the investment was legitimate. But in many cases, they feel significant “red flags” were missed by their banks.

Some victims made money transfers with the assistance of banking staff at their local branch, sending funds for a supposed international term deposit or offshore bond investment to a “holding account” at another Kiwi bank.

An armed services officer who lost $250,000 to a fake SBS bond scam was walked through the massive payment in person with his Takapuna ASB bank manager.

An 84-year-old West Auckland pensioner who lost $100,000 after her friend’s Facebook profile was hacked made 13 separate international money transfers in person at her local ASB branches with help from bank staff.

Deepak Udhani lost $100k in a scam. The Banking Ombudsman has declined his bid for compensation. Photo / Jason Oxenham
Deepak Udhani lost $100k in a scam. The Banking Ombudsman has declined his bid for compensation. Photo / Jason Oxenham

Deepak Udhani wrote the name of a known scam that had been subject to a Financial Markets Authority (FMA) public warning in the reference field of his online money transfer when he wired $100,000 to a fake BNP Paribas term deposit.

But despite making billions in profit each year, banks have admitted they don’t scan these fields for references to known scams and the Banking Ombudsman says they can’t be “compelled” to do so.

And after sending $200,000 to scammers in November 2022, David Wilson called Kiwibank to verify his money had gone to the intended recipient. The bank wouldn’t say due to privacy rules. None of his money has been recovered.

Glaring deficiencies in New Zealand’s banking system

As the victims’ group grew in numbers, they learned our banking system had glaring deficiencies compared to other countries, which in many cases directly contributed to their losses.

Foremost was the lack of any system allowing customers to verify details about the account receiving their money. “Confirmation of payee” technology is already in force overseas and credited with drastically reducing scam losses.

In Britain, banks are now forced to refund victims of authorised payment fraud, such as romance or investment scams. This encourages banks to invest in better fraud detection systems and apply more scrutiny to suspect payments. The same system is not in place here.

The Banking Ombudsman has repeatedly called for better customer protections and a review of fraud reimbursement rules. A select committee made similar recommendations.

Banking Ombudsman Nicola Sladden has repeatedly called for better customer protections and a review of fraud reimbursement rules.
Banking Ombudsman Nicola Sladden has repeatedly called for better customer protections and a review of fraud reimbursement rules.

Then in March, Consumer Affairs Minister Andrew Bayly put the banking sector on notice, warning it to move voluntarily or face government regulation.

“Nearly $200 million was lost to scams last year. This needs to change,” he told the Herald.

“Bank processes need to be strengthened to give Kiwis better protections.”

Many of the apparent failings relate to the customer’s bank that transferred the money. But what about receiving banks?

The Herald has uncovered a raft of cases where “mule” bank accounts have been used to launder millions of dollars in illicit funds for offshore crime syndicates, but the receiving banks responsible for monitoring those accounts have faced no apparent sanction.

They include:

*A Whanganui man suspected of using an ASB account to help steal up to $1.7m from eight victims. He faces seven charges and if convicted could be jailed for seven years.

*A Queensland man who used an ANZ account to launder $550,000 from three victims. New Zealand police have referred investigations to Australian authorities.

*Auckland mum Aimee Rodda, who opened accounts at three different NZ banks, then handed control to a Nigerian man she met in a bar. The accounts were used to steal more than $1m from 10 victims. Police say Rodda was “deceived” and won’t face criminal charges.

*A respected Auckland JP who faces 10 counts of money laundering in alleged offending involving 10 victims, $1.8m in stolen money and accounts at three separate banks.

These are only the cases we know about. There will likely be many more.

Despite many banks harbouring mules who are enabling the scammers, the Banking Ombudsman is unable to consider complaints about recipient banks because in most cases they have not provided “direct banking services” to duped customers.

This loophole has infuriated victims, who say it allows receiving banks to sidestep scrutiny and hide behind privacy rules after failing to detect criminal activity.

The Reserve Bank has oversight for policing banks’ compliance with anti-money laundering rules but refuses to comment on what investigations it has undertaken or what enforcement action is under way.

Meanwhile, more victims continue to be fleeced, while the criminals continue to operate with impunity.

Consumer NZ chief executive Jon Duffy says banks have failed their customers and need to act now to introduce proper consumer protections. Photo / Alex Burton
Consumer NZ chief executive Jon Duffy says banks have failed their customers and need to act now to introduce proper consumer protections. Photo / Alex Burton

Consumer NZ boss Jon Duffy has accused the banking sector of failing its customers and called for the Code of Banking Practice to be redrafted so it is fit for purpose and offers proper consumer protections.

He says that until confirmation of payee is introduced, banks should refund scam victims whose losses could have been avoided had the technology already been in force.

Under mounting pressure, the Banking Association has announced it is reviewing fraud reimbursement rules and introducing confirmation of payee later this year.

Banks have introduced other anti-fraud measures, such as removing links in text messages to customers and cracking down on mule accounts in phase one of an “Anti Scam Centre”.

Association chief executive Roger Beaumont says banks are committed to helping protect customers from scammers and are investing heavily in fraud detection systems and public awareness campaigns.

“Scams aren’t just a bank problem – people are deceived by fake websites, emails, texts, and social media ads. Government and other industries, particularly social media companies, also need to step up.”

The victim group is now in talks with lawyers over a possible class action to hold banks to account.

Their stories are deeply troubling. They hope their shared experiences will force real change and prevent others from losing everything they’ve worked for.

Lane Nichols is a senior journalist and deputy head of news based in Auckland. Before joining the Herald in 2012, he spent a decade at Wellington’s Dominion Post and the Nelson Mail.

This article was originally published on the NZ Herald here. 

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