An accused “money mule” already under investigation for stealing $1 million from an Auckland businessman was allegedly able to fleece another nine victims of nearly $800,000 before his accounts were frozen and he was arrested a year later for money laundering.

The victims all lost their life savings through an elaborate investment scam and are now demanding answers from the banking sector and police.

They want to know how an alleged criminal, reported to authorities in January last year after the initial fraud, was able to use multiple New Zealand bank accounts to allegedly target new victims before finally being arrested last month.

The initial victim is “horrified” that ANZ, Westpac and the police apparently failed to put other banks on notice so the alleged mule’s accounts could be shut down pending investigations into the $1m fraud.

“After January, you’d think they would have been aware. I’m horrified to hear there are nine more victims.”

Consumer NZ boss Jon Duffy said the case was “appalling”, but it was difficult to say where the fault lay until the full facts were revealed in court.

In his opinion: “The fact there are so many alleged victims and so many occurrences of alleged fraud here by one person - someone’s dropped the ball.”

The case relates to a South Auckland JP who is facing 10 counts of money laundering in alleged offending involving nearly $1.8m.

It’s alleged the man used “mule” accounts at three separate banks - Westpac, BNZ and ASB - to help offshore scammers steal the money between November 2022 and September 2023 before police raided his property last month.

If convicted, he faces up to seven years in jail.

The banks declined to answer questions about what action, if any, they took to share information and protect victims after becoming aware of criminal activity a year ago, while the matter was before the court. Police are also refusing to comment, referring questions to “those organisations responsible for the accounts”.

Multiple ‘red flags’

The initial victim, Colin*, was contacted in late 2022 by a man pretending to be a Citibank financial adviser after searching online for investment options.

Colin had recently sold a business and wanted to invest the proceeds for his retirement. After conducting due diligence, he agreed to invest in low-risk bonds.

Colin was instructed to send 20 separate online money transfers of $50,000 each (his transaction payment limit) from his ANZ accounts to a Westpac account. He made the 20 payments over the course of just eight days in November 2022.

In January 2023, an online “client portal” where Colin had been tracking his investment was deleted and the financial adviser cut contact. Colin instantly realised he’d been scammed. He contacted ANZ and police on January 20, 2023 to report the fraud.

An email from ANZ three days later stated the bank’s fraud team had contacted Westpac but none of the money could be recovered. ANZ suggested Colin report the matter to police.

And despite losing a seven-figure sum though bank fraud, Colin said he’d received no further correspondence or updates from ANZ or Westpac for more than a year until he lodged a complaint last week.

Colin said he believed ANZ missed numerous red flags when processing his unusual series of payments, all of which cited “Citibank” in the payee reference field.

Citibank was a known scam, having been the subject of an FMA warning and media articles here and overseas.

Citibank does not offer financial services to NZ retail clients, something Colin believes ANZ ought to have known.

Despite the payments citing a Citibank investment, the money was going to Wellington-based Westpac account.

Colin says he received no phone calls or two-factor authentication text messages to check the legitimacy of the payments and is surprised the 20 transactions did not raise suspicion from either banks’ fraud detection systems.

He said the scam had a huge impact emotionally and financially, causing many “sleepless nights and concern about all the money we’ve wasted and the hardship that might cause”.

“It’s a big part of my retirement fund, and it will make life difficult.”

Overseas cyber criminals are using NZ's bank payment systems to steal hundreds of millions of dollars from Kiwi victims each year.

The Herald has contacted several victims who lost large sums of money in the months after Colin reported the fraud. They are in disbelief that the police, ANZ and Westpac appear to have failed to protect other victims.

They believe the police and the banks should have shared details of the alleged mule with the wider financial sector to check if other banks were also harbouring the suspect and whether further offending was being committing from different accounts.

Auckland man Thomas* lost $100,000 in June last year - six months after Colin’s $1m loss was reported. The money was meant to pay for his son’s wedding. Learning he had been duped was devastating, he said.

“The emotions of losing such a big amount, it’s not easy. I felt quite low. I couldn’t sleep. I was lost.”

Retired Wellington social worker Amelia* lost her $200,000 retirement nest egg in July - seven months after authorities were put on notice. She says she has been forced to return to work and her retirement is now in jeopardy.

Losing the money was “a real shock”. She had kept the loss secret because “I don’t want people to feel sorry for me”.

And mature student Katie* lost her family’s $100,000 life savings in September - nine months after the alarm was first raised. She says she is stunned the alleged mule was not shut down by authorities in January last year.

“Prior to me, there had already been others who were victimised. Why had they done nothing to freeze the accounts?”

‘Incredibly upsetting’

Thomas, Amelia and Katie were all ASB customers. Correspondence in September from ASB shows the bank was aware of at least six victims connected to the alleged mule, and working with overseas banks to recover the money.

In a statement, ASB said its fraud team acted immediately upon learning a customer had been scammed to try to recover the lost funds, as well as working with police.

ASB said it took anti-money laundering obligations “very seriously” and had “stringent processes” in terms of on-boarding new customers and monitoring account activity.

The Herald also put detailed questions to the police, ANZ and Westpac.

Westpac declined to answer questions about whether it reported the $1m fraud to police, how one of its accounts was allegedly used to launder $1m in stolen money, and whether it took any steps to alert other banks after being told one of its customers was accused of large-scale bank fraud, saying it could not comment while the matter was before the court.

A spokesman said the bank “empathised” with the victim and his “incredibly upsetting” situation, and “responded promptly” to ANZ’s request to try to recover the stolen $1m.

“Any instance of a Westpac customer using their account to facilitate the transfer of illegal funds is taken very seriously.”

An ANZ spokeswoman also declined to answer questions about whether it reported the $1m loss to police, if it notified other banks of the fraud, or comment on why ANZ’s fraud detection systems did not flag 20 transactions to a payee sharing the name of a known scam as suspicious, as the matter was before the court.

ANZ said it had “a number of conversations” with the victim about the fraud.

“However, we acknowledge our communication regarding the final outcome of the investigation has not been as clear as we intended. We apologise for any extra confusion and stress this may have caused.”

ANZ has now re-opened an investigation into Colin’s case.

Asked what action police took to shut down the alleged mule, a police spokesman said fraud investigators liaised with other agencies “as required”, including banks.

“Police will provide advice where appropriate. However, questions regarding policies or practices are best referred to those organisations responsible for the accounts.”

Consumer NZ chief executive Jon Duffy.

Duffy said there were exceptions under the Privacy Act for the sharing of personal information if it related to the “prevention, investigation or detection” of criminal activity.

He believed this meant the banks and police should have been able to share the accused mule’s name and account details with other banks to protect other customers without breaching privacy rules.

He said the case highlighted the need for a dedicated “anti-scam centre” where financial institutions and banks could share real-time information about known scams, including the identities of suspected criminals using the bank payment system to commit fraud and launder stolen money.

Banking Omubdsman Nicola Sladden said stopping money mule activity was essential to preventing losses to scam victims, and she supported “urgent action” to tackle this issue.

“We expect banks to be vigilant and take proactive steps to identify and prevent money mule activity. This includes using technology, intelligence and lawful data sharing.”

* Names have been changed to protect victims’ identities.

HOW TO BE SAFE FROM SCAMMERS

Source: New Zealand Banking Association.

Lane Nichols is a senior journalist and deputy head of news based in Auckland. Before joining the Herald in 2012, he spent a decade at Wellington’s Dominion Post and the Nelson Mail.