Who are the people behind the schemes? Photo / 123RF
Sophisticated syndicates of international criminals are preying on vulnerable Kiwis in a web of elaborate scams, siphoning hundreds of millions of dollars out of the country. They are destroying families, wiping out retirement savings and leaving a dent in our economy, reports Chelsea Boyle.
She thought he was the love of her life.
But a trusting Kiwi pensioner was duped out of nearly $567,000 after falling victim to a romance scam last year.
The woman had used an online dating site aimed at widowers where she "met" a man who befriended her online and their virtual relationship blossomed over the months that followed.
The scammer had posed as a potential love interest, grooming the vulnerable old lady and making her fall for his elaborate trap.
He conjured up a variety of reasons why he needed her money and she duly emptied her account over the course of five months through 12 financial transactions.
The scammer told her he was urgently needed in Ghana to oversee the completion of a hospital on behalf of a bereaved friend whose family had been killed in a crash.
He also needed money to pay a fine that would allow hospital equipment to be released from cargo on a boat — a fine he could not pay himself because he had been the victim of identity fraud which had prevented his home bank from releasing money to him.
She swallowed his story hook, line and sinker.
Finally they arranged to meet in person. But when he did not show for their first scheduled meeting he later claimed he had been detained by Customs.
Still she believed him. The scam was only uncovered by a broker when the victim wanted to borrow $300,000 to forward the man more cash.
The woman did not wish to comment when approached by the Herald. She is ashamed of being taken in and fears being recognised by family members.
Bronwyn Groot, manager fraud education at the Commission for Financial Capability (CFFC), advocates for victims and also liaises with banks and money security agencies around the world in a bid to try to block accounts and track down scammers.
She said romance scams like that perpetrated on the pensioner were exceptionally hard for victims to bounce back from.
"That person that they've been speaking to for months on end who was going to come out and live with them or marry them, and now all of a sudden they have lost the money and the love of their life."
People duped by romance scams were often too scared to come forward because they had been mercilessly shamed.
"The big thing we need to remember is that these scams are sophisticated and continue to grow in their sophistication."
Every year Netsafe records more than $10 million in losses due to cybercrime but this year that mark has already been eclipsed.
However authorities say this is likely to be just the tip of the iceberg due to massive under-reporting. It is estimated Kiwis are now losing between $400m and $500m to cybercrime annually.
More than 500 scamming incidents have been reported to CERT NZ — which supports businesses, organisations and individuals affected by cyber security incidents — during the first three months of this year alone, the highest number ever.
Those reports showed that older people had been hit hard, with 87 per cent of the money lost coming from people over the age of 55.
Experts agree the true cost of these crimes has not been calculated because people are often too ashamed or embarrassed to admit they had fallen for a scam.
According to the CFFC, most of the money lost to scammers is not going to individuals, but is used by organised crime in drugs, arms and human trafficking.
For one Auckland man a cold call surveying his business interests would be the build-up to a complex scam that would only come into play months later.
He lost about $230,000 and says the financial drain took a huge toll on his relationship with his wife.
The couple spoke to the Herald but do not wish to be named because they don't want to tell some of their family members.
When the follow-up call came months after the scammers' first contact, they claimed the returns on the potential investment had already more than doubled, the man said.
There was a "sophisticated" looking website that required a login to look at how the investment shares were tracking on the global market.
"They were really slick," he said.
Keen to make a good investment for his family, he poured money into the scam over about five months.
Though he accepts he was taken in, the man is now asking why his bank did not question the large withdrawals from his account.
"What utterly amazes me is that they [the bank] have not asked any questions about the scammers."
His wife, who has stood by him, recalled the shock discovery and said it took a huge toll on the relationship.
"I found out by accident that something was not right."
She was surprised by the bank's apparent lack of interest.
"We never bank outside of New Zealand," she said. "For him to start shovelling significant sums to Malaysia and Hong Kong was incredibly out of character.
"The transactions are all fairly substantial amounts and not a peep out of the bank. I don't know what threshold you have to reach before they will actually take some notice."
The couple say they told the bank it should be reported to the fraud team. But when they eventually got in touch with the fraud department, they say they were told: "We've left it too late, we can't get any money back for you."
However, the scammers started to harass the couple, saying they had not received some of the payments.
"If the scammers had not contacted us we would have never known that money was still available," she said.
The couple made further inquiries and were able to regain $30,000 — "getting anything back was wonderful".
The couple said they felt fobbed off by banking officials.
Some of the scenarios victims are duped into believing seem far fetched. So how are victims taken in?
University of Auckland lecturer Dr Katrina Phillips, who specialises in behavioural psychology, said scammers had become increasingly skilled at being deceptive.
It was becoming harder to distinguish between approaches that were legitimate and those that were not, Phillips said.
Things like fake logos and helpline numbers were used online so people could still do the appropriate checks and still get taken in.
Scammers were also casting a "really broad net" by contacting thousands of people.
It was like fishing. It was not always successful but "they [the scammers] just need one to take and that's enough to keep them going".
People who were more trusting were more likely to get caught out, she said.
"Some areas of psychology do look at 'confirmation bias' — you look for information that you know to be true rather than look for things that disprove it."
Another consideration was the "sunk cost effect" — the idea that a person had put so much money into something they felt they had to keep going.
People carrying out the scams often lived in a state of deprivation or were subject to coercive conditions, Phillips said.
"They are generally not wealthy people. And it's faceless to them — they don't know it was your grandma who was sending her life savings to a Nigerian prince."
Advancements in technology had exacerbated that and people needed to be aware that everyone was vulnerable, she said.
Financial crime consultant Nicholas Gilmour has a doctorate in preventing money laundering and works in Auckland.
He believes scams will never be truly eradicated but can be combated.
Scammers typically fell into two streams, he said — opportunists looking for a quick return and the more professional scammers who would try and reel people in over time.
"People effectively fall for scams because of the natural instinct of greed," Gilmour said.
Until we could get rid of greed, we were not going to get rid of fraud.
The targets were often people who were unlikely to record what played out, he said.
"It's very much a manipulation. Everyone is different.
"You need to remember that behind all of this, the controlling authority behind all these scams is typically organised crime."
One of the biggest challenges in reclaiming the money was that it was almost always taken offshore, Gilmour said.
For instance, Nigerian 419 scams were prominent some years ago.
These required a small upfront payment in return for a much larger payoff later — they were typically referred to as the Nigerian prince scam.
"It was so significant to [the Nigerian] economy that putting an end to it, would have had a huge impact."
Gilmour believed the scale of the problem was so significant it was unlikely to be truly eradicated.
"We may understand yesterday's frauds, we may understand last week's frauds, but we don't know how the fraud will take place tomorrow. It's an ever-evolving process."
For organised crime to be successful it needed to be underpinned by money laundering, Gilmour said.
Imagine it as an old-fashioned egg-timer, he said: The sand that passed through the glass at the top was crime, the bottleneck was money laundering and success was once it dropped into the bottom.
"Until it's gone through that small narrow neck in the egg timer — until it's been laundered — effectively it can't be used."
Figures showing older New Zealanders are more susceptible to these crimes are a worry.
Age Concern chief executive Kevin Lamb said older people were often targeted.
"The sad reality is it is growing, it is constant and it is continual."
About 50 per cent of all cases of elder abuse were financially motivated, Lamb said.
In about 75 per cent of those cases someone within the family had scammed the victim, he said.
Lamb said some older people were persuaded to hand over all financial control to a family member, only to find further down the track none of their bills were being paid.
In other cases, loneliness made them vulnerable, as they were "courted by someone overseas" who claimed to need money to travel to New Zealand — thousands of dollars just disappeared.
Another common problem was people taking an older person's eftpos card to do their shopping for them but helping themselves to other things in the process.
"This time of year one of the scams that will sadly — I am almost certain it will — rear its ugly head again is people going around offering to service heat pumps."
Scammers would see the external mechanism on the house and front up on the doorstep offering to help, Lamb said.
They would fiddle with the filters but not actually do anything other than charge the occupant and in the worst cases they would steal things in the house.
The rapid changes in technology were a factor that made elderly people vulnerable to scams, he said. "Often for very good reasons, family and friends will equip an older person with an iPad, or tablet or computer to stay in touch."
But they had not been raised understanding how it all works or that "not everything you see online is to be trusted".
The convicted drug dealer was a friend of murdered Outlaws president Peter Lui.