Scammers are a major problem for New Zealanders. With ever-elaborate methods of targeting your savings, what can you do to keep yourself safe? Video / Ella Wilks, words / NZ Banking Association
An advocacy group is backing their claim, labelling attempts to pin responsibility on thosewho lose money through fraud as “tantamount to victim-blaming” and a breach of their legal rights.
However Banking Ombudsman Nicola Sladden is defending her office, saying the apportionment of financial liability between parties according to their respective failures is a well established legal principle.
The pair complained to the Banking Ombudsman that BNZ had missed crucial red flags when processing their online payments.
In a decision last month, Sladden ruled that despite the victims authorising the payments, BNZ was liable for 70 per cent of the lost money.
She found the bank failed to detect warning signs of a known scam and failed to act with reasonable skill and care, making it “substantially more culpable” than the victims.
However, she also ruled that Ares and O’Neil should shoulder some liability due to “contributory negligence” - or the extent that their own actions contributed to their loss.
“You did not take all reasonable steps to protect your own interests, that is, to ensure that your funds were invested securely with a legitimate fund,” Sladden’s preliminary finding said.
While the scammers used sophisticated techniques to trick victims, she found Ares and O’Neil had not conducted thorough due diligence and “the apportionment of liability must recognise this”.
Carla O'Neil lost $100,000 in an investment scam in which she thought she was putting the money into a Citibank term deposit. Photo / Michael Craig
Angered at suggestions they’d been negligent, the pair wrote to Sladden setting out the due diligence steps they took, requesting a review of her decision and for the BNZ to make full reimbursement.
“This scam was purely created by the scammer, knowing where the cracks are in the banking system in NZ and [using] that to their advantage,” O’Neil wrote.
“The causation sits with the scammer and the banks’ lack of security and warnings, not with me.”
In a letter of support, provided to the Herald by O’Neil, Victim Support strategy and advocacy general manager Dr Petrina Hargrave accused the Banking Ombudsman office of “victim-blaming”.
Fraudsters were using increasingly sophisticated methods, Hargrave said.
“If a bank fails to detect a scam, we cannot assume victims will, and then blame them if they don’t. Victim Support believes that when someone is a victim of a sophisticated crime, the contributory negligence defence may be tantamount to victim-blaming.”
Hargrave said online fraud could have life-changing financial, emotional, social and psychological consequences. This was often compounded by victim-blaming from banks, law enforcement, family and social media.
Victim Support strategy and advocacy general manager Dr Petrina Hargrave says it's unfair to blame fraud victims who lose money in scams.
Victim Support believed that blaming someone who lost money through bank fraud was a violation of the Victims Rights Act - namely the right to be treated with courtesy, compassion and dignity.
“Bank fraud victims are the victims of crime, and crime happens because of criminals, not because of victims’ negligence - not because a victim authorised a transaction in good faith under false pretences.”
Hargrave noted new rules in Britain forcing banks to refund victims who lost money in authorised “push payment” fraud - a move Sladden has been advocating for here.
Victim Support believed there was sufficient evidence for Kiwi victims tricked into making such payments to be “fully recompensed” by banks.
“We do not withhold recovered stolen property from burglary victims because they were out of the house, didn’t have an alarm, or left the window open.”
Fraud was massively under-reported, with many victims “suffering alone because of the blame and shame”, Hargrave said.
She told Sladden people in positions of authority had a responsibility to ensure victims were afforded their legal rights and not blamed for falling prey.
BNZ told Sladden it disagreed with her culpability findings and apportionment of 70 per cent liability to the bank.
It was “willing to accept” this, however, albeit with a caveat.
“We think it is important that your preliminary view acknowledges the responsibility customers have to protect themselves from fraud and that in this case it was the customers‘ instructions to the bank that were the direct cause of the loss.
“In our view, this recognises the critical role of customers to be their own first line of defence against scammers by taking all reasonable steps to protect their own interests.”
Sladden told the Herald her office treated all fraud victims with courtesy and compassion and “strongly refute” claims it was victim-blaming.
She had considerable sympathy for fraud victims and was deeply concerned about the rise in scams and associated human cost.
“We agree that fraud victims are the victims of crime. So we agree with Victim Support that the cause of the loss is the crime committed by the fraudster.”
The Banking Ombudsman’s role was to consider whether a bank had breached obligation to a customer, and if so, whether the bank should pay compensation. Her office had to apply the rules in force at the time of the complaint.
“In New Zealand, the onus is primarily on the customer to check that their money is going to the intended recipient and that the recipient is legitimate.”
If a bank should have detected warning signs of a scam, it must warn the customer. If it failed to do so, Sladden’s office had to apportion loss between the customer and bank.
Contributory negligence was a well established legal approach to apportioning loss between parties “in accordance with their respective contributions”, Sladden said.
Customers had a responsibility to take care of their own interests.
“It is not ‘victim blaming’ to allocate the loss between the bank and the customer based on their respective contributions to the loss.”
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.
