Consumer NZ calls for ASB to refund scam victim’s $100k loss due to ‘substandard’ bank security systems

A consumer watchdog is calling for one of the country’s biggest banks to refund a scam victim’s $100,000 loss amid claims of “substandard” security systems putting Kiwi customers at risk.

And a financial expert claims ASB was on notice of criminal activity when it processed the online payments but believes it hadn’t invested in the necessary technology to protect clients.

ASB is defending its anti-fraud systems as robust. It blames the duped victim for authorising the fraudulent money transfers and is refusing to offer more than a $2000 “goodwill” payment.

The victim sent two $50,000 online payments from his ASB account in June, believing he was investing in government-backed bonds with international finance giant BNP Paribas.

A month later, he realised he’d been scammed and hired private investigator Nick Mayer, who allegedly tracked the stolen money to a now-frozen BNZ account belonging to a respected Auckland JP.

The JP is now under police investigation and the Banking Ombudsman is also investigating.

The victim wrote “BNP Paribas” in the payee field on both transactions and believes ASB should have detected the fraud, as both the FMA and BNP Paribas had issued prior public warnings about the scam.

However, ASB has refused liability, saying payee name fields are only for customers’ reference and “not used by our system when processing transactions”.

Consumer NZ boss Jon Duffy has hit out at ASB, calling on the Australian-owned bank - which made nearly $1 billion in profits last year - to refund the victim’s $100,000 loss.

“ASB appears to have had all the information required to prevent this customer from becoming a victim in this scam but their systems failed to detect it. As a result, an individual has lost a life-changing sum of money.”

Duffy said in his view, banks were best placed to prevent customers being scammed rather than sheeting responsibility back to victims.

A screenshot of the victim's initial $50,000 online money transfer, referencing "BNP Paribas" as the payee.

Duffy believed the sector needed to immediately implement a confirmation of payee system - allowing customers to check the account name and number matched with the intended recipient when transferring money.

Banks had known for years the technology could prevent these types of scams but failed to implement it, Duffy said.

“We think it is unreasonable for banks to hide behind substandard systems and push all responsibility on to customers.

In his opinion: “The choice not to invest in this technology is a choice the banking industry has made that is turning their customers into victims and sending hundreds of millions of dollars into the pockets of criminals.” (Netsafe recently announced a partnership with two local fintechs, Akahu and Dolla, for an independent payee confirmation service, albeit with a couple of limitations.)

Consumer NZ CEO Jon Duffy is calling for ASB to refund a scam victim's $100,000 loss.

Following months of pressure, the NZ Banking Association announced a suite of anti-scam measures in September to crack down on bank fraud, including starting work on confirmation of payees.

However, Duffy has slammed the banking sector for its “glacial” progress.

Until the industry’s security systems were up to scratch, Consumer NZ wanted banks to reimburse any losses that would have been preventable had the same technology already in place overseas been implemented here.

“This appears to be one of these cases. We believe ASB should fully reimburse the victim of this crime. We will watch the outcome of the Banking Ombudsman investigation with interest.”

Former fund manager Janine Starks claims lax security systems are putting Kiwi bank customers at risk. Photo / Alex Burton

Former fund manager and financial commentator Janine Starks said in her view, ASB’s confirmation it didn’t screen payee fields when processing transactions was an admittance of “incompetence”.

“They cannot claim it is technologically impossible to screen for names.”

She believed banks hadn’t invested in the technology to keep customers safe and secure.

In her view, “that’s a direct failure under the banking code of practice for which they should be held liable”.

Starks claimed NZ banks had ignored advice to install warnings and manual checks on first-time investment payments, putting customers at risk.

She believed ASB was clearly on notice of criminal activity in the BNP Paribas case and felt it “cannot hide behind outdated systems”.

“Banks are letting down the entire financial services industry and undermining trust in investing, because people are getting caught by major flaws in the payment system and outdated tech.”

ASB CEO Vittoria Shortt.

An ASB spokeswoman said implementing an account name-checking system required co-ordination across the banking industry.

The sector was working to develop a confirmation-of-payee service, which included assessing technical options to share information safely, as well as privacy considerations

Confirmation-of-payee capability would stop some fraud but was not a panacea, she said. Criminals behind these scams were often part of sophisticated international syndicates using a variety of methods to target victims and were constantly innovating concerning their stories and methods.

ASB supported the establishment of an anti-scam centre to share information and tackle scams collaboratively.

Banks were already working together to reduce fraudulent payments to mule accounts. The industry had also committed to removing all hyperlinks from text messages to customers, which ASB eliminated last year.

“There are often multiple interactions between scammer and victim in the lead-up to a fraudulent payment being made, and banks are at the end of that chain of events. This is why a co-ordinated, multi-sector approach, coupled with education and awareness, is required.

“Keeping New Zealanders informed about the risks of scams and how to keep safe is a top priority for us, with awareness and vigilance the first and sometimes best line of defence.”

ASB encouraged customers to set up two-factor authentication, put daily payment limits on accounts and be wary of cold calls or deals that sound too good to be true.