Government handouts and those getting insurance payouts in the wake of Cyclone Gabrielle and the North Island floods will be prime targets for fraudsters, an expert says.
Paul O’Neil, who has previously worked in the Serious Fraud Office as its general counsel and before that was head of enforcement at the Financial Markets Authority, said it was common for fraud to occur on the back of a disaster.
“In the wake of the Christchurch earthquakes we had three very large Ponzi schemes operating in the Christchurch region ... where people were getting payouts from the EQC for their house so they were sitting there with a bunch of money and interest rates were very low.”
He said in smaller communities some people used their networks of family and friends to exploit those close connections and get access to people who they know are sitting on large sums of money.
“Similarly you have seen opportunists in relation to Covid where there is a large amount of money being paid out through relief schemes.”
O’Neil said it was inevitable that there would be fraud occurring in relation to the recent floods and cyclones.
“People see opportunities there either to rip people off who have had payouts or to use some form of identity theft or some form of application fraud to get access to it themselves. That’s not unique to New Zealand as such but certainly, in the recent national disasters that you could think about there have been incidences of fraud in relation to all of them. People who are dedicated criminals are just looking for opportunities.”
O’Neil said dispensing relief funds quickly to natural disaster victims meant some of the usual controls had to be suspended.
“The way money moves out in response to relief is too quick to prevent fraud so there will definitely be some. It’s a question of how much and on what scale, and do you know enough when you spat the money out to claw it back. You can take the friction away so the money gets out quickly but ideally, have enough controls in place that once the dust settles ... you can do some clawing back and retracing. But any time there is relief pushed out in a swift way there will be fraud.”
O’Neil, who currently works for the Employers and Manufacturers Association, was speaking ahead of the NZ International Fraud Film Festival. The two-day event on March 29 and 30 attracts fraud experts from all over the country who come together to share tips and trends on fraud with the opportunity to watch a number of films featuring the very issues they are dealing with on a day-to-day basis.
It’s the first time the event, which is also open to the public on the second day with a limited number of free tickets, has been held since Covid. Reports of fraud and scams have been on the rise in recent years.
O’Neil said overseas counterparts had reported that Covid had seen some career criminals switch from the drug trade and prostitution racketeering into fraud as it was seen as a quicker, more efficient and less violent way to get money.
Government handouts during Covid were seen as a soft target.
“They are giving out tens of billions of dollars and all I have to do is create some fictitious identities - I could get that just by sending an email - I don’t need to pull out a gun or engage in some dangerous activity - so those dedicated criminals have just done a bit of a risk assessment and a pivot - and thought to themselves - that’s a rich source of funds that I can defraud and it’s proved very lucrative for them.”
O’Neil said it was generally accepted that up to 5 per cent of Government funds would be lost to fraud.
He said New Zealand’s rates of financial crime and fraud were pretty consistent with other countries although New Zealanders appeared more likely to under-report it.
”I would say New Zealanders are probably more inclined not to report it - we don’t report it as much as other countries - natural Kiwi shyness or reluctance to come forward. To be honest that goes for a lot of crimes. But otherwise we are not much different.
“The US has their Bernie Madoff ... we have had versions of those in NZ - just not as out there as him.”
In terms of what drove a person to undertake fraudulent activity, O’Neil said often it could start out with a business venture going wrong.
“Unless you are dealing with an absolute psychopath, it’s usually a business venture that has gone wrong on their behalf so something has pushed them into it, a gambling habit or some other form of addiction or a business loss they have suffered. It’s very rare from day one that people say I am going to rip people off - that does happen - but they are usually pushed into it by circumstances and then decide they have a flair for it.”
O’Neil said typical attributes for fraudsters included a high level of self-confidence.
“They usually have a form of charisma. And they tend to have an ability to justify their actions to themselves which is almost limitless. An ability to push on with behaviour and justify it to themselves in a way that means they don’t second-guess themselves and are able to plough on with absolute self-confidence.”
And they are good at identifying vulnerable people who were their targets.
O’Neil said older people were often victims due to their isolation. People were often good at assessing other people’s risks of being scammed but not their own.
“It’s a bit like everyone thinks they are a good driver and everyone else is hopeless. Everyone thinks their ability to assess risk is pretty good, their neighbours not so much and we like to believe in a good thing - we like to believe we are clever and have good instincts.”
He said once people were tricked into believing it was a good deal it was often hard to convince them it was a scam or fraud.
“In my roles at the SFO, FMA previously we have literally conducted search warrants, people have been arrested and we have had complaints from people saying I can’t believe you have disrupted this marvellous investment before I was about to get my big payoff. Even at that point people are still thinking no no, I am right about this, you don’t understand.”
He said the biggest red flag for fraud was that it appeared to be too good to be true.
“And the words guaranteed should also have you hanging up. Nothing is ever guaranteed unless they are offering you death or taxes.”
O’Neil said there needed to be more financial literacy education in New Zealand. But people could often protect themselves by talking to friends and family about whether something was a good deal and doing a quick Google search also revealed if it was on a watch or scam list.
This year the festival features the New Zealand premieres of The Talented Mr Rosenberg, which explains how a fraudster convinced banks, art galleries, elite investors, wives and girlfriends that he was a sophisticated, cultured tycoon - a doco which, unusually, sees the fraudster himself participate; and China Hackers, tracing the recent evolution of Chinese hackers from anti-establishment individuals to co-ordinated groups involved in industrial espionage and the leaking of confidential European documents.
O’Neil said his pick of the films was Gaming Wall St - a film about the Gamestop phenomenon which saw hedge funds pitted against Reddit users.
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