274,000 scammed in past 12 months: Victims call for Govt action

Sunday, 6 August 2023

There are about 5200 fraud or thefts from New Zealanders’ bank accounts each week, a nationally representative poll by Horizon Research shows.

The Horizon survey of just under 1100 people suggests about 274,000 people experienced fraud or theft from a bank account during the past year.

It’s the second time in the last month that new figures have thrown light on an unprecedented scam crime wave being directed at New Zealanders, echoing the recent Crime and Victimisation Survey, published days before Nigel Latta’s bank-funded You’ve Been Scammed series hit the screens.

The Crime and Victimisation Survey said the annual number of fraud and deception crimes had risen to 510,000 a year from 288,000, with more than 90% of those crimes not reported to police.

But scam victims are beginning to rebel against the idea that they should hide their losses, or be entirely blamed for them, and calling for political action for a legal duty of care on banks to protect their customers.

A group of victims of the Citibank fraud is building into a network of activists, and calling on Parliament to set minimum legal standards for banks.

Their calls include for Parliament to force banks to deploy systems to spot when the account names and numbers people are transferring money to do not match, systems which are already in place in countries like the United Kingdom to spot probable fraud.

The failure to match name and account numbers is a flaw in New Zealand’s banking system that garnered headlines last year in the case of a woman who lost $150,000 in a scam.

Ginny Andersen, Minister for the Digital Economy and Communications, did not signal any plans to move on account matching, but said the Government had invested in building a single reporting platform for cyber incidents, a victim remediation service, and public education.

And, she said: “To help reduce the impacts of phishing on New Zealand individuals and businesses, the Government has funded through Cert NZ the development of a Phishing Disruption Service.”

Text phishing scams were the biggest vector of scams, Anderson said.

Horizon’s numbers show the number of people who have had “security incidents” on their accounts is running at around 6557 a week, adding up to around 341,000 a year.

Graeme Colman from Horizon said its polling showed fraud was eroding people’s trust in banks.

Horizon asked which banks survey respondents were with, providing a ranking of which banks had the highest proportion of customers who had fallen victim to theft or fraud from an account. Many people have accounts with more than one bank, however.

Horizon’s numbers indicate Bank of New Zealand (BNZ) had the lowest proportion of customers who had lost money to scams in the past 12 months, but BNZ customers defrauded by scammers posing as Citibank employees struggle to believe BNZ is any better than other banks.

Borja Ares said BNZ should have recognised several “red flags” that he was being manipulated by criminals into sending them over $300,000 in the Citibank scam.

The Citibank scammers gathered the contact details of victims through a fake savings comparison website promoted through Google “sponsored links”, then called them to convince them to “invest” their money.

But Ares said when he told BNZ he was transferring money to invest in Citibank, the bank didn’t stop the payment despite the Citibank scam having been known to it for months.

And, when he transferred money to what he thought was an account in his own name in Citibank, he was in fact sending the money to an ASB account in somebody else’s name.

Something similar happened to real estate agent Carla O’Neill in February.

She said BNZ branch staff raised no red flags when she transferred money to “invest” with Citibank, despite the money going to an ASB, not a Citibank account, and the account name not being her own.

“I now know BNZ had known about the Citibank scam for months, and months,” she said.

The Financial Markets Authority Te Mana Tātai Hokohoko, issued a warning about the Citibank scam late last year, but Ares says the scam had been going on for months before that.

Both Ares and O’Neill got a small fraction of their money back, but have lodged complaints with the Banking Ombudsman, which can order compensation, if it concludes banks failed to deliver their services with reasonable care and skill.

Fraud expert Bronwyn Groot joined scam victims in their call for political action.

It was a common experience of fraud victims to write to MPs, and get no response, or just form letters in reply, she said.

“I think they [politicians] need to stand up. They need to do something,” Groot said.

She was particularly concerned when bank staff did not appear to know about the most common scams like the Citibank scam.

“That’s banking 101,” she said.

Payments NZ recognised the lack of account name and number matching was an issue in September 2020 when it published its “modernisation plan”, which included considering developing account name and number matching.

Payments NZ governs New Zealand’s bank payments systems, and is owned by the major banks.

Its plan said: “By 2030, customers are highly likely to want world-class, safe and secure real-time payment systems that are also data-rich.”

But the failure to match name and number on account transactions was first raised as an issue in a court case against BNZ in 2011, involving an in-house accountant who went undetected for 10 years, despite making payments to accounts that did not match the names of the payees.

As well as setting out minimum payments standards, Ares believes it’s time for the Government to set out in law what compensation banks have to pay when they have failed to act on “red flags”.

Banking Ombudsman Nicola Sladden said not all banks responded in a timely, fair and consistent way to scam victims.

The ombudsman did not publish fraud complaint numbers on its complaints dashboard, however revealed banks told the ombudsman they had had 2496 complaints relating to fraud between April 1, 2022 and March 31, 2023. That was up 47% on the previous year.

Sladden did organise banks to calculate a scam loss figure last year indicating losses of around $183m a year.

Sladden said there were differences between banks, but she had been working with banks to ensure their security procedures met best practice.

BNZ’s head of financial crime, Ashley Kai Fong, said banks deployed automated technology, and trained staff to recognise red flags for scams, but also worked to educate the public to recognise scams.

Different banks had their own proprietary processes and systems to combat fraud, he said.

Sometimes banks would simply refuse to make a payment, if they felt the person was being scammed.

But it was a big call to make as banks had a duty to follow their customers’ instructions, he said.

“When it’s clear in some cases that it is a scam, we have gone out on a limb and said, ‘Do you know what? We actually think you are in a scam, and we won’t be sending this money. You can send it somewhere else, but the bank is advising you not to do it’,” Kai Fong said.

That happened in 2021, when Warkworth woman Thea Strydom was conned by a romance scammer, but a BNZ staff member recognised what was happening and twice refused to allow a money transfer to go ahead.

Refusing a transaction could be a fraught conversation as some scam victims were “so socially engineered, they don’t even take our advice,” Kai Fong said.

ANZ said it continued to invest in fraud detection systems, including on the latest biometric technology which it planned to deploy next year, but the systems it had put in place recently, including a new tool called ANZ Fraud Check, were working.

“Improvements to our systems and ability to identify suspicious behaviour have enabled us to minimise overall fraud losses despite a significant increase in attack behaviour,” ANZ said.