Bank missed warning signs of scam during phone call with customer

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Bank missed warning signs of scam during phone call with customer

Categories:

Fraud and scams,

Summary:

Joshua transferred $40,000 from his account to another New Zealand bank account after scammers impersonating a New Zealand bank offered him an investment opportunity that he accepted. The scammers then encouraged him to put money in another type of investment and directed him to transfer $110,000 to another New Zealand bank account. For unknown reasons, the money was returned. The scammers then directed him to transfer the money to an Australian account. Joshua called his bank to set up international money payments, explaining the nature of the transfer to the staff member he spoke to. He even mentioned that a first payment had been returned and he now had to send the money to Australia.

The staff member helped him set up the facility to make international payments, but he could transfer only up to $100,000 so he made one payment of $50,000, intending to transfer a second amount later. The payment triggered the bank's fraud detection system, and a fraud officer called to ask questions designed to reveal scams. She was satisfied with his answers and allowed the payment. In the call, Joshua mentioned that the recipient account number showed as that of the Australian bank in which he was investing, and so he presumed this was a check that the funds were going to the right account.

A week later, Joshua realised he had been scammed and the bank tried to recover the payments, but could get back only $1,000. Joshua asked the bank to reimburse him for his $89,000 loss, but the bank refused, saying he had authorised the payments.

Published:

May 2025

Our investigation

We listened to Joshua’s phone call to the bank and considered the bank had not acted with reasonable skill and care, specifically, that it had failed to identify and respond to the warning signs of a possible scam. We considered Joshua’s answers to the fraud officer's questions raised red flags that should have prompted further inquiries. The circumstances of the payment were unusual, and failed payments and changed payment instructions were a common feature of scams. Furthermore, the bank had not corrected Joshua's misunderstanding about the account number. The fact the account number showed as the Australian bank merely confirmed the account was held with that bank, not that the payment instructions were correct or the recipient was legitimate, or that the bank had carried out checks of any sort.

We concluded the bank had been put on notice about a real possibility that Joshua was being defrauded. It had an obligation to make further inquiries and, if necessary, warn him of a possible scam, which it had not done. If it had, we considered Joshua would have discovered the scam, and the loss from the second payment would have been prevented. But at the same time, we considered Joshua had some responsibility for the loss because it was his decision to make the transfer and to ensure he invested his funds safely. There were also indicators in his correspondence with the scammers that could have alerted him to the fact it was a scam.

We recommended the bank reimburse 70 per cent of the loss from the second transaction, or $34,300. The bank agreed to settle the complaint on that basis, adding $500 for problems Joshua experienced during the fraud investigation.