The banking watchdog has launched an investigation into one of the country’s biggest banks after an Australian-based Kiwi couple lost more than $300,000 in a sophisticated investment scam. 

Private school principal Mark Geraets has accused Westpac of negligence after he and his wife Yvonne lost their life savings in March this year. 

Geraets claims a recorded phone call between him and Westpac that shows the bank gave him “false confidence” that the investment proceeds were being safely transferred to an account set up under his own name. 

In reality, the account name wasn’t checked, the money was sent to a “mule” account under a different name and the supposed investment was a sham. 

The couple want Westpac to reimburse their loss, but Westpac is defending its actions and refusing to offer compensation. 

“It is the view of the bank that there were no red flags that we could reasonably have been expected to act upon,” a customer solutions manager informed the couple in May. 

“We consider that we have acted with reasonable care and skill in our interactions with you and with the processing of your transaction.” 

After being knocked back by Westpac, the couple took their case to the very top, writing a letter to the bank’s CEO Catherine McGrath. 

In a reply, McGrath told the victims she was sorry about their experience and the toll it had taken, especially as they were preparing for their retirement years together. 

Westpac New Zealand chief executive Catherine McGrath said she was sorry for the couple's loss but believed the bank had acted with reasonable skill and care. Photo / Mark Tantrum 

And while she admitted parts of the UK’s banking system were “further advanced” than New Zealand’s, she was confident Westpac had acted appropriately “upon your instruction and exercised our duty of care”. 

“In my experience, banks are usually the last point in a long chain of fraud and scam activity. We take our responsibilities to keep customers safe very seriously and are continuing to invest heavily in fraud and scam protections.” 

‘I just don’t think they checked’ 

Geraets, 61, was contacted earlier this year by a man posing as an HSBC portfolio manager who convinced him to invest in Victoria State Government bonds with the National Australia Bank (NAB). 

Geraets made a $323,000 online money transfer on March 8, believing he was sending the money to an Australian account in his own name and says he discussed this during a verification phone call with Westpac the following day, before the payment was released. 

“Can you tell me who you are sending the money to please?” the staff member asked. 

“I am sending it to M.H. & Y.J. Geraets,” Geraets replied. 

“Great, yeah that is fine, I can see that,” the staffer said. 

Mark and Yvonne Geraets lost $323,000 in March this year in a sophisticated investment scam. 

Geraets says the conversation led him to believe the bank had verified the receiving account name, which he believes should have happened given the size of the transfer. 

After realising he’d been duped, Geraets alerted Westpac and police. Westpac immediately contacted the Australian bank, which put a freeze on the account and recovered $123,000. The other $200,000 was lost. 

Geraets complained to Westpac, arguing it had failed in its duty of care by not carrying out proper due diligence. 

“For $300,000, you’d think the account name would hold some weight and importance,” he told the Herald. 

“I just don’t think they checked.” 

‘Profound sense of loss and vulnerability’ 

In his letter to McGrath, Geraets detailed the huge toll the fraud had inflicted on the couple, including the “grim reality of struggling to pay routine bills in our retirement”, despite years of prudent financial planning and savings. 

“The emotional impact on us is no less significant. We have suffered sleepless nights, a constant state of stress, and a pervasive anxiety that has disrupted our ability to concentrate on day-to-day activities. 

“The level of emotional turmoil is a testament to the profound sense of loss and vulnerability we both feel.” 

Geraets told McGrath the couple had been loyal customers for 40 years. They trusted Westpac to keep them safe and said the fraud had destroyed their confidence in the bank. 

Mark and Yvonne Geraets lost $323,000 in a scam and believe Westpac should compensate them for their loss. 

“Despite verifying the payee name with me, the agent made no mention of the fact that the payee name was irrelevant and wouldn’t be checked. This was negligent,” he alleged. 

Geraets added that he was inexperienced in the world of investments and expected expert banking staff to keep him and his money safe. 

“This was a once-in-a-lifetime payment for me and in this circumstance, I expect my bank to act with skill.” 

The couple complained to the Banking Ombudsman, which has now agreed to investigate Westpac’s actions and determine whether compensation should be awarded. 

A Westpac spokeswoman said Geraets would have seen a warning when making the transfer that account numbers were not checked against account names. 

“When we phoned to query Mr Geraets’ transaction, he assured us he was paying an Australian account at NAB that was in his and his spouse’s name and did not mention it was an investment or that the account was not his own.” 

Even when a Confirmation of Payee service is rolled out later this year to check recipient account details, it won’t verify accounts across different countries, Westpac said. 

“We had no way to check who the recipient was, and never suggested to Mr Geraets we had verified this information.” 

Westpac added that Geraets had made similar large payments to accounts in Australia in the past year, so the $323,000 transfer did not seem “out of step” with his previous banking activity. 

Westpac empathised with the Geraets’ situation and would fully co-operate with the Banking Ombudsman review. 

Lane Nichols is Deputy Head of News and a senior journalist for the New Zealand Herald with more than 20 years’ experience in the industry.