Bank scam victims disappointed by Ombudsman's decision
Friday, 19 April 2024
Natural justice has been ignored in the Banking Ombudsman’s final decisions on two complaints about the BNZ made by the victims of investment scams, one of the victims says.
Whangārei health worker Borja Ares was a victim of the Citibank investment fraud in May last year. He was manipulated by scammers into thinking he was investing $310,000 with Citibank, and BNZ staff helped him transfer the money from a property sale to them.
He believed BNZ was liable for his loss because it should not have allowed the transactions to proceed, and made a complaint to the Banking Ombudsman about it.
The Citibank investment scam was well known and he made several explicit references during his calls to the bank about wanting to invest the money with Citibank, and that should have aroused suspicions and prompted inquiries from the bank, he said.
Auckland real estate agent Carla O’Neil was also a victim of the Citibank scammers, and sent $100,000 to them in February last year, thinking she was investing in a term deposit. She also complained to the Ombudsman about BNZ’s role in the transfers.
In preliminary decisions earlier this year, the Ombudsman, Nicola Sladden, concluded BNZ should have identified warning signs that Ares and O'Neil were being scammed, and said the bank should partially compensate them.
BNZ was ordered to pay each complainant 70% of their loss as the Ombudsman said they were partly to blame for the losses. That meant compensation of $217,297 for Ares, and $54,998 for O’Neil.
Ares and O’Neil, who are part of a network of scam victims formed to support each other, were unhappy with aspects of the preliminary decisions, while BNZ disagreed with the findings, but agreed it would pay.
Now, the Ombudsman has issued her final decisions on the complaints, and she has not changed her original decision to apportion 30% of the blame to Ares and O’Neil and award them repayment of 70%.
Submissions from Ares and O’Neil, banking expert Janine Starks, Scott Russel Legal and Victim Support had asked for 100% of the losses to be repaid to the two victims.
In the final decisions, the Ombudsman said BNZ breached the principles of good banking practice and was principally liable for the losses as it failed to issue warnings when there were grounds for it to suspect the two were being defrauded.
But the principles of contributory negligence had to be considered in working out liability for the losses, and she could not conclude the bank was solely responsible for the loss.
“When instructing a bank to transfer funds, the onus remains primarily on the customer to ensure the legitimacy of the intended recipient of his or her funds.”
The Ombudsman said she weighed up all factors in Ares and O’Neil’s submissions, and considered a fair allocation of liability for their losses was for BNZ to reimburse them with the amounts ordered in the preliminary decisions.
She also disagreed with Ares’ assertion the preliminary decision was based on a “feeling that the loss should be shared between the bank and the victim”, and said what was fair in the circumstances had been carefully considered.
A BNZ spokesperson said that while the bank disagreed with the findings in terms of culpability, in the interests of achieving a final outcome for O’Neil and Ares, it accepted the Ombudsman’s position.
“We are very aware of the consequences these scams have had on Ms O’Neil and Mr Ares, and we are mindful of the length of time that has passed since their complaints were raised with the Ombudsman.'
Ares said he was extremely disappointed by the final decision and could not understand why the Ombudsman had relied on common law, rather than natural justice.
“The Ombudsman didn't carefully consider each case and the responsibilities, rather it just considers us negligent. That is a victim-blaming mentality, and it's quite concerning.”
There was a bias from the beginning, and that led to the decision to go with the 70/30 split in liability, regardless of the submissions they made and the information they presented, he said.
“Most of the final decision is a legal justification for the use of the Contributory Negligence Act, and leaves many of the points I made unanswered.”
The process involved was not accessible and the decision that had been reached was unfair, he said.
Ares and O’Neil have until May 3 to decide whether they would accept the recommended compensation.
As the decision was final, and the Ombudsman would not consider the complaint further, Ares said he would have to accept it.
“But I will be working with the rest of the people in the scam victim network to pursue a class action lawsuit on this issue.”
Banking expert Janine Starks was “hugely” disappointed by the decision, and said she was surprised there was no award for stress and inconvenience when BNZ were negligent and ignored obvious red-flags on the payments.
“The victims have been out of pocket and intensely worried for a year. By doing their job BNZ could have saved both victims and they’d have all of their money today, not 70% of it.”
The banking skill was taken out of banking when BNZ was allowed to pin 30% of the blame on a victim, and the Ombudsman let them off $120,000 of losses, she said.
“BNZ failed in their duty of care and skill, but they’re able to blame their customer for unwittingly presenting them with payment instructions that a competent bank would not have processed.”
These investment frauds were directly targeted at flaws in the New Zealand banking system, where names and account numbers were not matched, she said.
“Our banks could have solved the problem long ago by asking all legitimate financial services providers to put their accounts on the registered payees list on internet banking.
“They could have screened investment payments, and they could have rejected payments not going to registered accounts. There were fixes for this crime that didn’t involve the time delay of confirmation of payee.”
In the final decision the Ombudsman said: “We continue to support a review of the rules governing fraud reimbursement”.