BNZ reluctantly agrees to pay $217,000 to scam victim it failed

Thursday, 29 February 2024

Bank of New Zealand (BNZ) has told the Banking Ombudsman it does not agree with her decision to order it to pay $217,000 compensation to a scam victim it should have done more to protect.

However, the bank has now written to Banking Ombudsman Nicola Sladden to say it will pay the victim “in the interests of achieving a final outcome” for him.

BNZ customer Borja Ares took a complaint against the bank to the Banking Ombudsman after he was manipulated by scammers into thinking he was investing $300,000 with Citibank.

The Banking Ombudsman issued a preliminary decision in early February on Ares’ complaint in which she concluded that BNZ staff had missed red flags that should have alerted the bank to the possibility that Ares was being defrauded.

Sladden ordered BNZ to pay Ares 70% of the money that was stolen from him.

BNZ has now written to the Banking Ombudsman accepting her decision, while also telling her: “We disagree with your findings in terms of culpability and the apportionment of 70% of liability to BNZ.”

However, the bank did welcome the Banking Ombudsman saying that bank customers had a responsibility for protecting themselves from fraud.

“In our view, this recognises the critical role of customers to be their own first line of defence against scammers by taking all reasonable steps to protect their own interests,” Kay Wilson, the bank’s senior manager for customer resolution at BNZ said in the letter to the Banking Ombudsman.

However, she said: “We are very mindful of the consequences this scam has had on Mr Ares de la Serna”.

“We are also mindful of the length of time that has passed since he first raised his complaint with your office and we recognise this has been a very stressful time for him and his family,” Wilson said.

Because of that, she said: “BNZ is willing to accept the position on liability set out in your preliminary view.”

The decision by the Banking Ombudsman has upset not only BNZ. Her decision to apportion 30% of the losses to Ares prompted national charity Victim Support to say banks were victim blaming.

“At Victim Support, we observe fraud victims being blamed by their banks, those in the justice system, family, friends, even strangers on social media,” said Dr Petrina Hargrave, general manager strategy and advocacy at Victim Support.

Ares welcomed BNZ’s decision to pay, which ended the threat that it could decide to challenge the Banking Ombudsman’s decision.

However, he said the BNZ continued to push the narrative that scam losses were the fault of victims rather than weak bank security systems.

Ares is one of a number of scam victims who have banded together to support each other and to push for banks to improve their scam defences, and for politicians to legislate minimum standards for bank fraud protections.

The victims have succeeded in putting the spotlight on weaknesses in banks’ fraud systems, and banks have pledged to improve them.

However, the scam victims’ campaign to drive change has so far not prompted the Government to follow the United Kingdom into forcing banks to take responsibility for customers’ fraud losses unless the customer has been grossly negligent.

On Friday, the Government is expected to issue a response to a select committee report on scam protections at banks. The report was published in August after select committee hearings in 2022 and 2023.

However, rather than recommending new laws be put in place, MPs on the select committee urged banks to voluntarily beef up their fraud defences, update their voluntary Code of Banking Practice “to offer further measures that help protect consumers from scams and fraudulent activity”, and investigate setting up a voluntary fraud compensation scheme.