ANZ misses investment scam warning from Banking Ombudsman after email caught in bank’s spam filter

An official warning sent to the financial sector about the growing risk of investment scams was missed by the country’s biggest bank because it got caught in the company’s spam filter.

The March 2023 email from Banking Ombudsman Nicola Sladden warned of the rise in fake term deposit schemes and came at the height of a Citibank-branded scam that was fleecing millions of dollars from unsuspecting New Zealand bank customers.

The email - which contained a link to a known scam website - recommended banks provide additional warnings to customers considering transferring money to term deposits, update staff training and review warnings on bank websites, internet banking and pop-up alerts.

Consumer NZ boss Jon Duffy has blasted ANZ for what he sees as a failure to prioritise correspondence about serious financial crime from the agency tasked with holding the banking sector to account.

“The irony is their spam filter systems seem more effective than their ability to counter known scams for their customers.

“They can’t just bury their head in the sand and hope that this passes over. We are being targeted by scammers in New Zealand. We’re losing hundreds of millions of dollars a year and the banks need to take responsibility to improve their systems.”

However, ANZ has defended its systems as robust and says it takes its response to scams and fraud “very seriously”.

Emails containing links to fake or malicious websites were blocked by its systems and the Banking Ombudsman’s email contained only “broad information” about scams, it said.

“ANZ has a fraud monitoring system and currently a team of more than 100 detection analysts and fraud investigators in place to attempt to identify suspicious activity on customer accounts and help try to protect customers from scams. We stop many regularly.”

One of the Citibank scam victims - an ANZ customer who lost $350,000 in May last year - said she was in disbelief that a company which generated $2.1 billion in net profit last year appears to have treated important correspondence about criminal activity targeting the sector’s online payment system as “junk mail”.

The woman wrote “Citibank” in the payment reference field on one of her online transactions and believed this should have been a red flag to ANZ due to previous FMA and regulatory warnings. However, she was declined compensation last week following a Banking Ombudsman investigation into her case.

She now wonders if the loss of her late mother’s inheritance could have been prevented had ANZ received the warning a few months earlier and been on heightened alert for the fraud.

“Banking Ombudsman emails landing in spam? Come on,” she told the Herald.

“For the biggest bank in NZ that’s pretty poor form.”

Consumer NZ CEO Jon Duffy says ANZ's spam filter systems seem more effective than the bank's ability to counter known scams for customers.

Duffy said he was astonished that the country’s biggest and most profitable bank, in his opinion, hadn’t invested in the necessary IT to prioritise emails from the banking watchdog.

“If you have the industry regulator communicating with you about something that’s extremely important, and given the sums of money that we’re sending out the door with this particular scam, you need to be paying attention to it. You need to have systems in place that receive that information and act on it, and not direct it into a spam filter.”

Duffy said he believed NZ banks had been too slow to implement systems to detect scams and protect customers, which were already in place overseas.

“They’ve had an enormous amount of time. These are not new issues. We have known about this type of scam for years.

“Our banking industry has sat on its hands and done nothing. Unfortunately it’s innocent New Zealanders who are carrying the cost for that.”

Duffy said trust in the banking system had eroded. He called for the Government to urgently review regulatory settings to force banks to implement necessary systems to detect fraudulent payments instead of sheeting home liability to victims.

Financial commentator Janine Starks says the country's banks need to implement better systems to protect customers from scams. Photo / Alex Burton

Financial commentator and former fund manager Janine Starks, who is advocating on behalf of victims, said in her view ANZ’s spam failure was a “fiasco.

“This ... leaves the customer wondering ‘what-if’.

“What if ANZ had received the warning? They may have installed fraud warnings for term deposit transfers as suggested. Her fraud could have been stopped.”

An ANZ spokeswoman said it was already aware of the Citibank scam from a 2022 FMA warning. However, being generally aware of a particular type of scam going around (via email or other means) did not mean a bank was aware a specific customer was being defrauded.

ANZ continuously refined its systems to stay up to date with current scams, including communications from CERT NZ, FMA, police, government agencies, media reports and the Banking Ombudsman.

“ANZ has a team of fraud analysts updating our fraud detection algorithms to attempt to identify transactions that meet certain fraud or scam criteria. In our experience, monitoring specific reference details is not an effective preventive measure against scams.”

ANZ carefully considered how it brought information about the evolving scam landscape to customers’ attention. Its website and social media channels featured advice on how to avoid fraud and scams. It also invested significantly in staff training and resources.

“We believe continuing education and awareness for our staff and our customers can make a difference in stopping people from being scammed.”

Sladden told the Herald she supported a review of the rules governing fraud reimbursement, including the development of an overarching regulatory framework that set clear responsibilities on banks and other sectors in addressing fraud and scams.

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 Nelson Mail.