NZ First candidate, former police officer file Reserve Bank complaint ...

A New Zealand First candidate and a former police officer who together lost more than $500,000 through a scam have filed a complaint with the Reserve Bank claiming Kiwibank harboured a “fraudulent” mule account that was used to siphon their stolen money overseas.

The complaint alleges the state-owned retail bank failed to carry out necessary due diligence or properly monitor the account as required under anti-money laundering (AML) regulations, resulting in their life-changing financial loss.

It’s also claimed Kiwibank failed to act on scam concerns following a phone call from Auckland businessman and political candidate Dr David Wilson on December 13, 2022 - just one day after the former South Auckland cop transferred his life savings to the same account.

The men argue had those concerns been escalated by Kiwibank staff, the retired police officer’s $300,000-plus investment might have been recovered.

“It is very likely the money was still there when David made this call and extremely likely the transfers could have been returned,” the complaint alleges.

“For both couples, the money stolen is retirement savings. It is a substantial value and has life-changing consequences.”

The victims were both tricked by a fake Macquarie Asset Management scam, believing they were purchasing Government-backed “green bonds” from the Commonwealth Bank of Australia.

They were sent payments instructions for a Kiwibank account under the name CEB Holdings, whose director is Auckland retail worker Aimee Rodda.

A Herald investigation revealed Rodda was paid $20,000 by an organised crime group to set up accounts at three different banks, which were used by offshore scammers to steal more than $1 million from 10 victims.

Police had been preparing to prosecute Rodda for money laundering, but now say she was also “deceived” and won’t face charges.

Wilson, who’s next on NZ First’s list to enter Parliament, lost $200,000.

Two weeks after sending the money from his own bank, HSBC, he grew suspicious and phoned Kiwibank to try to confirm whether the recipient account belonged to a scammer.

The Kiwibank staffer refused to provide details, citing privacy, confirming only that it was “a legitimate account”.

“So there’s no real protection for me ... to ensure the account I’m paying it into is actually them,” Wilson says in the recorded call.

“I just want to make sure my money’s gone to the right place.”

The men’s joint complaint was prepared by former fund manager and financial commentator Janine Starks.

She wrote that Wilson made it clear he was worried about a scam, which should have put Kiwibank “on notice” to investigate further and report the account to the bank’s fraud team.

“It would then become obvious that money was being deposited and moved quickly out of this account, offshore. It is foreseeable that failing to suspend this account would cause losses to the people paying money in.”

Starks said Wilson’s phone call should have disrupted the criminal offending. Had the fraud been immediately detected, Wilson would have reported it to HSBC, which would have alerted Kiwibank and commenced recovery action.

“Additionally, if the bank officer in the phone call had reported David’s call to the fraud department at Kiwibank, funds could have been frozen, preventing [the former police officer’s] losses.”

The complaint says Wilson sought advice from the Privacy Commissioner on Kiwibank’s refusal to provide information about the mule account.

In an email seen by the Herald, the Privacy Commissioner’s office said the Privacy Act gave banks “discretion” to disclose information if the disclosure was necessary to prevent a crime.

Starks claimed Kiwibank was “hiding behind privacy laws”, and by doing so preventing scam victims from recovering stolen money.

This “evasive action” showed “blatant disregard for the victims of fraud and a lax approach to the disruption of money laundering”, the complaint alleged.

The complaint asks the Reserve Bank to investigate Kiwibank’s role in allowing Rodda’s account to be run illegally and whether Kiwibank met its fraud monitoring obligations.

Starks said the pattern of large incoming payments over several weeks should have triggered extra scrutiny, given the payments were “unlikely and irregular’ for a customer whose usual income was from retail work.

The outgoing payments to offshore accounts were another “red flag”, she wrote.

“There are layers of risk here. If this situation didn’t trigger any AML warning, it is difficult to envisage what would.”

The two victims have also raised a complaint about the Reserve Bank and its procedures for monitoring retail banks’ compliance with AML rules.

Starks said there had been two years of large-scale investment fraud involving mule accounts, costing victims hundreds of millions of dollars.

The Reserve Bank should be actively monitoring and “forcing banks to tighten procedures”.

“The crimes involve the laundering of the proceeds from fraud to offshore organised crime groups, and we would have expected RBNZ to provide banks with directives to detect these crimes.

“Why has RBNZ not demanded more technology and monitoring to intercept these crimes, in line with international best practice?”

A Reserve Bank spokesman confirmed receipt of the complaints and said it was now “talking to the relevant bank as part of our assessment”.

It would not comment further on active investigations or enforcement activity.

The Reserve Bank was responsible for ensuring the financial institutions it regulated and supervised met their obligations under the Anti-Money Laundering and Countering Financing of Terrorism Act.

This was done through on-site visits and interviews, and ensuring financial organisations developed programmes to “manage and mitigate” risks associated with money laundering.

Reporting agencies were also required to report suspicious activity to the Commissioner of Police.

The rise of scams was causing “real pain for its victims” and the Reserve Bank was “committed” to working with partner agencies - including the Financial Markets Authority, Cert NZ and police - to develop a response to scams and fraud.

A Kiwibank spokeswoman said it took all complaints seriously and was investigating the concerns raised by the two victims.

“Earlier complaints made by Mr Wilson, which have been considered by the Banking Ombudsman and the Office for the Privacy Commission, have found no wrongdoing on Kiwibank’s part.”

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.