A top law firm has accused the country’s state-owned bank of failing to detect suspicious or illegal activity after a Kiwibank branch manager helped a scam victim send her $300,000 life savings to fraudsters. 

The huge first-time payment - supposedly an investment in Australian Government-backed Barclays Bank bonds - came just four months after our own Financial Markets Authority (FMA) issued a public warning about the fake Citibank investment scheme. 

The Herald can reveal that the victim handed the Kiwibank manager printouts of documents sent by the scammers. They included a payment invoice showing funds for the supposed international investment were actually being sent to an ASB “fast saver” account in Whanganui. 

It’s alleged the manager processed the payment without questioning the victim about the nature of the transfer, the legitimacy of the recipient or whether the transaction could be subject to fraud. 

“She basically said, ‘Sign it’ and stamped it, and that was it,” the victim told the Herald. 

Losing the money had had far-reaching physical and emotional effects. 

“I’m on anti-anxiety medication. I can’t work. What have I got to look forward to? 

“It’s devastating. That was my future, comfortable retirement. There’s no way I can get that money back.” 

The victim, who the Herald has agreed not to name, said she chose to make the massive money transfer in person because she wanted to ensure it was done safely and assumed anything suspicious would be detected by trained bank staff. 

None of the stolen funds were recovered and she has now complained to the Banking Ombudsman who has launched an investigation. 

The victim has also engaged law firm Meredith Connell which wrote to Kiwibank in October. 

Meredith Connell associate Stephanie Cann has accused Kiwibank of failing to detect illegal activity. 

It’s alleged Kiwibank was negligent in failing to detect any “red flags” or conduct proper due diligence before processing the payment - despite being on notice about the scam. 

“Kiwibank has failed to recognise or ... flag suspicious activity,” Meredith Connell associate Stephanie Cann alleged. 

“Kiwibank should have investigated the matter more fully and determined that the transfer was to be paid into an account that was likely used for illegal activity.” 

The Herald put detailed questions to Kiwibank. It declined to comment while the case was before the Banking Ombudsman. 

However, in a reply to Meredith Connell, the bank defended its actions, saying “standard processes were followed” by staff when processing the transaction. 

“You will appreciate that it is difficult for our frontline members in the moment to identify fraud transfers from legitimate for the purpose of investing funds, particularly where the customer is providing instruction to authorise the transaction. 

“We are dependent on our customers to do their due diligence prior to authorising the transfer. In this case, there were no red flags that should have prevented our branch team from following through with the customer’s instructions.” 

A Herald investigation has revealed that the man whose ASB account received the stolen cash is a company CEO and former school board member. He has been charged with seven counts of money laundering in connection with seven victims and total losses of around $1.5 million. 

‘He hooked me straight away’ 

The Kiwibank victim, who is in her 60s, had recently sold a house and wanted to invest the proceeds towards her retirement. 

She searched online for investment opportunities in late 2022 before being phoned by a man claiming to be a Sydney-based Citibank investment adviser using the name Robert Sapuppo. He was impersonating a real Citibank employee and using a seemingly legitimate email address with links to Citibank’s genuine website. 

The scammer convinced the victim to invest $300,000. 

“He hooked me straight away. They were government bonds and fully guaranteed. It just made me feel like I was on a winning streak.” 

She was sent payment instructions for an ASB account supposedly under the name Asia Pacific Client Account NZ. 

The victim visited an upper North Island Kiwibank branch on November 28, 2022, to make the transfer. 

After she approached the counter, a manager took her to a side room. The victim said she handed the manager payment invoice documents referencing Citibank and Barclays Bank bonds. 

Banking Ombudsman Nicola Sladden is investigating the case. Photo / File 

And despite the FMA posting a Citibank investment scam warning four months earlier on July 26, 2022, Meredith Connell claims the manager “did not raise any concerns or ask ... any questions” before processing the transaction. 

The victim says she was asked to sign a same-day payment form and left the branch after 10 to 15 minutes. 

She only learned it was a scam months later when the adviser stopped replying to her messages. She called Citibank to check why her first interest payment had not arrived but was told she had no investment account. She then alerted Kiwibank and police. 

The victim - who is now living in a campervan and uncertain about her future - said the money had been inheritance proceeds from her parents. 

“And now it’s just gone - poof. 

“All the things I was going to do are now impossible because I’ve got no money.” 

She believes Kiwibank should be liable for her loss due to its alleged failings. She felt ASB should be jointly liable for allegedly harbouring a mule account used to launder stolen money for offshore criminals. 

“I’m hoping I haven’t lost it. I’m hoping the Banking Ombudsman is going to say the banks screwed up.” 

ASB’s executive general manager for technology and operations, David Bullock, said it could not comment while the alleged mule was before the courts. 

ASB took its anti-money laundering obligations seriously and had “stringent processes” when on-boarding customers and monitoring for unusual account activity. 

It was actively monitoring for fraud and had prevented a “significant number” of customers from opening accounts over the past year because they failed to meet anti-money laundering requirements. 

Police said the alleged mule is due to reappear in court next month. If convicted, he faces up to seven years in jail. 

This story was originally published on the Herald, here