The victim says his world fell apart when he realised he'd lost $400,000 to international scammers. Graphic / Herald Artists
Burner phones, international scammers and a disbarred lawyer are at the centre of a sophisticated scam that cost a Kiwi man $400,000. The victim says a law change is needed to protect unsuspecting Kiwis. Lane Nichols investigates.
He once worked for the rich and famous, travelling the world and living a life most of us could only dream of.
But the Kiwi man is now undergoing therapy and trying to understand how international scammers convinced him to wire his family’s life savings to a New Zealand-based “money mule” who is now before the courts for laundering the stolen cash.
Ben* says he used to read about people being scammed and think “that would never happen to me”.
Learning he had been duped out of $400,000 was a bitter reality to accept.
“That’s when my life fell apart.
“It’s like losing a child in a way. Just the feeling of guilt, shame and absolute frustration that no one can do anything about it, and burning hot anger that there’s a person in Auckland who’s willing to take advantage of people like this.”
It was late on the storm-lashed Sunday night of Cyclone Gabrielle that Ben realised a band of professional criminals had duped him into investing his and his wife’s savings in a fake HSBC-branded term deposit, then stolen the cash after he willingly wired it to a Kiwibank “cooling off” account which he believed had been set up under his own name.
A disbarred lawyer was arrested last month and is now before the courts for his alleged role in the elaborate investment scam.
The Reserve Bank initially assessed if there was “merit” in testing whether the country’s state-owned bank met anti-money laundering obligations in connection with the significant theft, but ruled out the need for further action.
The story is full of twists and turns, with enough plot twists to fill an Agatha Christie novel.
Ben turned amateur detective after realising the money was gone, using “burner phones” in a bid to obtain evidence and catch the crooks in the act, and spending countless hours online building a dossier of clues about those responsible for the crime.
Instead of pocketing a commission and then forwarding the money on after it was received on February 2, the mule transferred hundreds of thousands of dollars to various companies and bank accounts, including $50,000 to an exclusive private school, in 11 separate payments the very next day on February 3, court documents obtained by the Herald show. He later told police he thought the money that appeared in his account was a pre-arranged loan that he always intended to pay back.
There were months-long delays in collaring the alleged mule - despite Ben handing police evidence of the alleged launderer’s name - after Kiwibank inadvertently outed the accused crim when it froze the alleged mule’s account and refunded half the stolen money on February 16.
Multiple investigations have been carried out by various agencies but - apart from an additional $14,000 payment on March 27 - the remaining money is presumed lost.
The man’s own bank, ASB, was cleared by the Banking Ombudsman because it was acting on the victim’s instructions when it transferred the huge sum of money to Kiwibank - despite the sophisticated scam being on banks’ radars here and overseas since last year.
The Reserve Bank told the victim last month there was merit in “taking this case forward” to test Kiwibank’s obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act, after someone with a questionable background was able to receive and immediately move the money on without any red flags being triggered.
It has since decided not to pursue the matter further.
Then there is the deep personal despair and existential self-reflection involved in knowing you have been absolutely taken in - that what you believed absolutely to be genuine was nothing more than a cynical fraud designed to fleece you and your loved ones for everything you had.
“It’s devastating,” Ben admits.
“I’ve been getting counselling for it ever since. I’ve been dealing with so many different people and organisations to try to unravel it because I feel like I’m obliged to do what I can for the next people that come along.”
The story begins in January this year.
Ben and his wife had recently sold their home and repurchased in a new city. They decided to invest the remaining sale proceeds, so Ben went looking online for the best returns.
In a now familiar tale, he punched in a Google search, found a website comparing bank term deposit rates and entered his details.
Ben was contacted the next day by a “Rupert Smith”, who claimed to be from HSBC.
Smith had a well-spoken English accent, was knowledgeable about the investment world, and claimed to have worked previously for one of the big Wall Street banks in London.
“He was extremely smooth. He was incredibly professional and well-educated. I would hazard a guess that he’s worked in the banking sector or worked for financial companies before.
“He got quite personal asking a lot of questions about what I did for a living and managed to meet every one of those situations with a service that his bank could provide.
“He was just wrapping me up in a ball of comfort really. He did most of the talking and he was able to just put me at ease before I had any doubt.”
While Smith appeared to be calling from an Auckland 09 phone number, Ben now believes he was likely based offshore and part of an international crime network which has been draining millions of dollars from Kiwi victims in recent months, as highlighted by a Herald investigation.
Smith forwarded Ben prospectus material for a range of investment options, settling on a one-year “triple access” fixed deposit, offering an interest rate of 6.2 per cent.
“It was a click above what other banks were offering and he gave me the option to make three withdrawals during the year which really appealed to me.”
Ben says he later checked Smith’s email address, which was slightly altered from the actual HSBC email, and the logo on documents sent by the scammer was marginally different.
“But when it comes through in an email it looks completely legit. There are no spelling mistakes. It’s exactly the same as an email that you’d get from the bank.”
As with other victims, Ben was made to jump through anti-money laundering hoops to help legitimise the fraud before his account was verified and his term deposit authorised.
He was then sent an HSBC-branded payment invoice specifying the Kiwibank account that he should transfer the money to.
Given the size of the payment, Ben had to provide a reference and account number, and send a photo of himself to ASB for verification.
He wrote “HSBC 12 month fixed term deposit” as the receiver, but says unlike financial institutions overseas, New Zealand banks are not required to check the name matches with the actual recipient, leaving Kiwi customers vulnerable to scams.
He is among a growing number of victims and commentators calling for a law change to bring our banking practices into line with foreign jurisdictions and protect consumers.
“You could write, ‘I’m sending it to a Nigerian scammer’ and it wouldn’t raise any alarm bells.
“It gets the banks off the hook. They can send thousands of dollars around the world for scammers and they have no liability for it, even though they are supposed to be responsible and educated and fiduciary.
“There are two people engaged in a transaction here. There’s a scammer and a scammee. The only thing standing between them is the bank.
“The bank has to facilitate this agreement and the way the law is set up it just allows for the bank to be this completely blindfolded partner.”
Smith told Ben the Kiwibank facility was a “cooling off” account, where the money would sit for two weeks, in which time he could back out with a full refund.
“He explained it to me and I said, ‘Well at least it’s going to a New Zealand bank account’, and that made me feel safe.”
The payment transfer occurred on February 2. Ben was then sent log-in details to an elaborate online “client portal” that appeared to show his money had been received into the term deposit and was accruing interest.
But then things got a little fishy.
The scammers began asking for more information, including a transaction ID to “clear the funds”.
Financial records suggest the alleged mule used the money for his own purposes, paying more than $200,000 to various companies and accounts just a day after receiving Ben’s savings.
“[The mule] had already used half of that money for his own benefit and obviously had no intention of giving the money to the scammers, therefore they were feeling a bit out of pocket and were doing anything they could to slow me down from going to the police.”
After being arrested last month, the mule told police he thought the $400,000 that appeared in his Kiwibank account was a pre-arranged loan that he always intended to pay back.
The penny finally dropped about 9pm on that stormy Sunday night of February 12.
“To be brutally honest it was all my wife. She had a doubt. I was completely wrapped up in the security blanket. She said, ‘It takes two minutes to make a call to HSBC’, which we did.
“We just called the customer service number for HSBC Auckland and they straight away said, ‘We know of that alias, this person does not work at our bank’.”
In an instant, Ben’s world imploded.
He immediately contacted ASB and police.
“I was awake all night. It was the worst night of my life.”
After being alerted to the fraud, Kiwibank froze the recipient account and secured the remaining funds.
Four days later on February 16, $204,628.52 mysteriously landed in Ben’s account from Kiwibank. Amazingly, the transfer included the name of the company that controlled the recipient account.
Ben googled the company name and that of its director, who was revealed as the struck-off lawyer.
Ben is now questioning what vetting Kiwibank did before allowing the disbarred lawyer to open an account and what monitoring was conducted given his background.
“I don’t know whether he should have raised red flags within the banking community but I very much want the Reserve Bank to look into it and they’ve agreed this does warrant being tested.”
An email to Ben last month from a Reserve Bank enforcement manager says the agency’s specialist supervision team has “concluded that there is merit in taking this case forward to test Kiwibank’s AML/CFT (Anti-Money Laundering and Countering Financing of Terrorism) obligations”.
The Reserve Bank has since written to Kiwibank saying “we are not pursuing this from an enforcement standpoint”.
Asked how he felt learning the man who received his stolen money was a disgraced Auckland lawyer, Ben says he briefly imagined hiring a private security officer “to burn his house down”.
“How would you feel if the person who stole your life savings is sitting in Auckland in a business suit going about his daily routine?”
Ben provided the evidence he’d uncovered to police and expected them to pounce on the alleged mule, but months dragged on without an arrest.
He complained about the investigation’s lack of progress and asked why police had not swooped on the man and laid charges.
“I had months when the police were just saying, ‘I’m sorry, we can’t do anything about it. We don’t have the resources. They said every time there’s a murder in Auckland this case gets put down the pile because it’s the same people in CIB investigating financial crimes as investigating murders.”
So he launched his own investigation.
Ben set up another email account and contacted the scammers through the fake investment website, then spoke to them on burner phones, posing as another potential victim in a bid to find out where they were based.
He was contacted by two separate scammers, one claiming to be from Citibank and the other a subsidiary of Westpac Australia.
“I was just gathering information for the police and I found out quite a lot. I found out that it’s multiple people and they’re doing multiple scams working off this one website.
“I think there’s a head office receiving the details that people enter into this fixed term deposits website and they’re giving those details to these freelancing scammers who have probably bought into it somehow and they go away with whichever scam they’re choosing on that day. It could be HSBC, it could be Citibank.
“But apparently no one cares about that, I mean you’re the first person to show any interest.”
Ben says the website he stumbled upon on Google is still active and presumably taking in more victims. He’s frustrated and upset that no one seems to be policing this or working to shut the scammers down.
He believes New Zealand authorities lack the expertise or legal framework to tackle what is a global crime syndicate preying on unsuspecting Kiwis.
“They’re absolutely ruthless criminals and they need to be stopped.
“But NZ authorities don’t have the resources, they don’t have the skills, they don’t have anything they require and the law’s not working in their favour either.”
Ben accepts that he should have conducted more due diligence.
“I should have called the bank. That was my biggest mistake.
“I know now my understanding of how scams work was limited at the time. I knew to watch out for email addresses and I knew to put the checks in place. But I think at the time I was rushing. I find all this banking and investment stuff a little bit tedious. I just didn’t spend enough time with the due diligence.
“I felt so comfortable [with] this person that I was talking to on the phone. He’s so good. You would have absolutely no reason to doubt him. He didn’t appear like a scammer. He didn’t have anything illegitimate about him. He just seemed like my regular premium bank account manager at ASB.”
Ben wants to highlight the systemic deficiencies he’s uncovered and warn other people about the inherent risks.
“There’s definitely a shortfall in the way banks are allowing criminals to move money around New Zealand, and there is a really sophisticated group of criminals out there who are just miles ahead of the current laws.”
He says the scammers count on the shame that victims feel as a “psychological benefit” to their crime.
“Most of my close friends don’t know about this and it comes back to that shame.
“There’s something about these scams because everyone’s aware of them but no one really thinks it will happen to them and when it does it’s just shock and disbelief.”
He admits being impressed with the scammers’ ability and sophistication, even after losing his life savings.
“I thought, “Shit these guys are getting good’. My wife said to me, ‘What if it’s a scam?’ I said, ‘If it’s a scam it’s the most sophisticated scam I’ve heard of, that’s for sure.
“I ate my words on that one.”
A Kiwibank spokeswoman said it immediately froze the recipient account when alerted to the fraud and tried to recover funds that had already been transferred to other financial institutions.
Kiwibank said it complied with a police production order request within the stipulated deadline.
The bank was satisfied it completed all required AML checks as part of its due diligence process and that its customer “met the requirements”.
Asked why the account activity did not raise any red flags, the spokeswoman said: “There was nothing about the transactions that would trigger any security warnings.”
The spokesman said the Reserve Bank was not investigating Kiwibank or pursuing any enforcement action over this case.
She added that Kiwibank would support any regulatory or legislative change that helped protect customers.
“Some other countries have systems in place to share account names between institutions, but this is not currently a requirement or something that bank systems in New Zealand are able to check for.”
ASB said its payment security checks were focused on ensuring the customer is who they say they are, and that they have authority to make the payment.
“These security checks were made in [Ben’s] case, and within an hour of being alerted to an issue, ASB contacted Kiwibank to recall the funds. Once the funds were moved on from Kiwibank we rely on them to contact any further receiving banks.”
A police spokesman said a man was arrested last month in connection with a fraud investigation reported to police on February 12.
“As this matter is now before the court, police are limited in further comment around the incident itself, however as enquiries are ongoing we cannot rule out further arrests.”
The Financial Markets Authority said the watchdog posted regular warnings about known scams on its website.
Asked what action it was taking against fake investment websites that were being fed to unsuspecting scam victims on Google searches, a spokesman said: “The FMA doesn’t have any regulatory authority over Google, but we would like to work with them on their financial advertisement verification programme.”
Cert NZ said the agency worked with Google to shut down suspect URLs when they were reported.
It would not specify how many websites had been disabled by Google following Cert approaches, citing operational sensitivity.
* The victim’s name has been changed to protect his identity.
This story has been updated to reflect that while the Reserve Bank initially considered the merits of testing whether Kiwibank had met its anti-money laundering obligations in respect of this case, it ultimately decided not to pursue any further action.
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