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ASB not reporting a $100,000 fraud to police was a “serious lack of judgment” and “not a good look” which may have undermined the chances of catching the criminals and put other potential victims at risk, banking experts claim.
Former fund manager Janine Starks said in her opinion it was typical of banks to consider their own regulatory compliance issues “and forget their moral obligation to mitigate risk to the community”.
While Massey University associate professor Claire Matthews agrees it would have been sensible for police to have been contacted, she is backing ASB’s call not to tell the elderly victim’s family she had been scammed due to the bank’s privacy and confidentiality obligations to customers.
“I think in this case not contacting the family was the right thing to have done. Yes, she’s an older person but they’re an adult and they’re entitled to do what they want to do.”
The vulnerable 84-year-old West Aucklander lost more than $100,000 after scammers hacked her elderly friend’s Facebook account and convinced the victim to send money to unlock an imaginary Covid-19 subsidy payment.
ASB eventually identified the fraud in June after the pensioner had made 13 international money transfers, in person at local branches with the assistance of ASB staff, to three separate overseas accounts.
None of the funds have been recovered and her family are furious bank staff did not alert relatives or police. They claim ASB has failed in its duty of care.
Relatives only learned the octogenarian had been scammed by chance two months later when reviewing her bank statements.
They alerted police who launched an immediate investigation, which included contacting Australian police through Interpol.
New South Wales officers have now identified the recipient bank accounts but say the months-long delay in reporting the fraud meant the cash was likely long gone and crucial CCTV footage that could have identified the offenders has most likely been wiped.
ASB has defended its handling of the woman’s case and denied liability. While ASB “encouraged” the victim to speak to her family and police, it says the woman did not want to do so and the bank “had to respect her wishes”.
Claire Matthews is an associate professor at Massey University business school. Photo / Supplied
Matthews said she understood why the family felt they should have been alerted but she agreed with the bank’s stance.
The victim was an adult and entitled to make independent decisions, Matthews said. The bank also had privacy and confidentiality obligations to its customers.
However, Matthews believed it would have been sensible to alert authorities as soon as serious fraud offending was discovered.
“In my view, it’s not a good look. I can understand her not wanting to tell the family. But could the bank have gone directly to police? I think they probably could have. I don’t think they had to rely on the customer not wanting to raise the complaint.”
Under current anti-money laundering rules, there was no obligation for ASB to contact police because its customer was the victim, not perpetrator of the fraud.
“But I think it would have been desirable once they had identified something criminal was happening to make contact with police and to have said, ‘This is what’s happened’.”
The delayed police involvement may have cost investigators the opportunity to prosecute the offenders. It may also have undermined the opportunity to recover the lost funds - though in reality the stolen cash had most likely been withdrawn the moment it landed in offshore accounts, Matthews said.
Former fund manager and investment banker Janine Starks has accused New Zealand banks of negligence and failing to keep customers safe from fraud. Photo / Alex Burton
Starks has been highly critical of New Zealand banks following the rise in scam cases, accusing them of “corporate failure” and negligence in terms of customer protection.
She believed ASB’s decision not to involve police was a serious lapse of judgment that had the potential to put other customers at risk if they were also targeted by the same scammers.
“Failing to report that criminals are extracting money from New Zealanders via a Covid payment scam prevents the police, other banks and agencies such as CERT and Netsafe from putting out new or repeat warnings and detecting wider activity.
“[ASB] know the offshore bank account number this victim made payments to. That information could have resulted in a bank-wide warning to prevent other customers paying people by this name or with this account number.”
In her opinion, the situation raised questions around liability if other cases are discovered.
Stark also believed an elderly widow with no history of overseas money transfers making 13 such transactions in the space of a few months should have raised immediate suspicions and closer inspection by bank staff.
“My experience with some of these fraud cases is that the technology behind banks’ transaction monitoring appears to be severely lacking and it raises the question of whether their security and culture is proportionate with the fraud environment.”
ASB chief executive Vittoria Shortt.
ASB is defending its security systems as robust.
It told the victim’s family its actions did not contribute to her loss and it would not reimburse the stolen money.
The victim had authorised the transactions and repeatedly confirmed to bank staff that she knew who was receiving the money, was confident she wasn’t being scammed and aware the funds would likely be lost if she’d been defrauded.
There was nothing in her responses that raised suspicion about the transfers, the bank said.
The fraud was detected when a new teller sought advice about the final transaction from a manager, who became suspicious about the pattern of money transfers. The manager froze the woman’s online banking and alerted ASB’s fraud department.
When questioned by staff, the woman said “she had made payments like this in the past, and that the funds were to help a friend”.
As the woman had authorised the transactions and the bank had taken immediate steps to try to recover the funds, ASB was not liable.
ASB said it took fraud losses seriously, investing heavily in sophisticated preventative technology.
The bank was acting on the victim’s instructions not to alert family or police.
“We had to respect her wishes.”
‘It’s bizarre’
In February, the woman received a message from someone she’d met at a club for elderly people, saying, “There’s a Covid payment, if you click on this link you qualify”.
The woman then swapped more than 200 Facebook messages and emails with the scammers, who were posing as her friend, as well as an “accountant” she thought was helping her to access the Covid subsidy.
Between February and June this year, she wired more than $100,000 overseas to three Australian accounts, each under different names.
The final seven payments, totalling more than $50,000, were made in the space of just 20 days.
And despite ASB finally identifying the fraud in late June and freezing the woman’s online accounts, her daughter-in-law Kim Weston says no one from ASB reported the fraud to family or police.
Relatives only learned the octogenarian had been fleeced by chance two months later, by which time the money trail had gone cold.
The woman was now embarrassed, “sheepish” and refusing to discuss the scam.
“We said, ‘Why didn’t you pick up the phone and ask questions’,” Weston said.
“She wouldn’t tell us very much at all.
“She’s 84, she’s obviously in denial and doesn’t think she’s done anything wrong.
In her opinion: “If the bank had contacted the family we may have been able to recover the funds.”
On learning of the scam, Weston - who is a signatory on her mother-in-law’s account - contacted ASB and was shocked that no one had alerted authorities.
“If I didn’t find the evidence we still wouldn’t have known.
“That’s what we can’t understand. Why didn’t anyone contact the family or file a police report? But nothing happened. I think it’s bizarre.”
After Weston reported the fraud, police contacted their Australian counterparts, who have now identified the recipient bank accounts and are working to trace those responsible.
However, in an email last week, NSW criminal investigations said the months-long delay in reporting the fraud meant the cash was likely long gone.
“Often when the money hits the account in these sorts of investigations it will either be withdrawn or transferred through multiple different accounts, sometimes opened through ID theft.
“Also unfortunately as these transactions happened a few months ago, CCTV expires and we are often chasing behind the money trail which also makes it more difficult.”
Australian police added that unfortunately “banks often like to wash their hands of these sorts of matters”.
Weston complained to ASB, alleging the bank had failed her elderly relative, who lives alone and has banked with ASB for 60 years.
She asked why ASB’s fraud prevention systems didn’t flag the 13 transactions as unusual, especially given the victim had never made an international money transfer before.
In a final response letter last week, ASB said it was not liable for the loss.
Waitematā CIB Detective Senior Sergeant Ryan Bunting said police had now forwarded evidence to Australian authorities.
Asked if it would have been prudent for ASB to immediately report the fraud to police, Bunting said: “If an agency or person is concerned about a matter which requires police involvement, it would be appropriate for that person or agency to refer the matter to police.
