He thought he was investing in a state-backed renewable energy scheme with zero tax and zero risk. But it was all an elaborate hoax that even fooled two financial experts and the money was long gone. Lane Nichols reports.
A “gutted” pensioner has lost $150,000 after scammers convinced him to sink his savings into a bogus HSBC-branded investment scheme providing seed finance for a government-backed offshore wind farm project.
The fake “eco bond” investment opportunity promised to provide an attractive tax-free interest rate with funds “fully protected”.
The glossy hoax prospective was so convincing that 68-year-old retired Waikato business owner Chris Hawkings - who initially planned to invest $500,000 - wasn’t the only one taken in.
As part of his due diligence, Hawkings ran preliminary material past his accountant and investment expert John Cliffe, who offered informal feedback. Both agreed it looked sound.
Cliffe even phoned the scammer on an 04 number that purportedly linked to HSBC’s Wellington office and after questioning a man with a European accent, known as Mike Willow, said it seemed legitimate.
“He appeared to me that he knew a lot about investing,” Cliffe said, stressing that he had not acted as Hawkings’ investment adviser, nor did he view the final investment documents before Hawkings wired the money.
“[Willow] was making statements that were totally consistent with what I would expect from a trader or adviser in his role.
“It’s easy to see in hindsight.”
Hawkings had recently sold his family business. Cashed up and preparing for retirement, he went online in January to find investments offering the best returns.
He registered on a website comparing term deposits and received a phone call the next day from Willow, who emailed detailed investment brochures on the eco bond proposal, setting out a sliding scale of returns depending on how much was invested.
Cliffe checked the HSBC and Financial Markets Authority (FMA) websites for scam warnings but found nothing, so Hawkings went ahead - reducing his exposure to $150,000 on Cliffe and his accountant’s recommendation.
To make the ruse more authentic, Willow made Hawkings jump through the necessary anti-money laundering hoops, including proof of identification and address, and even charged him a $15 account processing fee, urging him to move quickly because the offer was likely to be “heavily over-subscribed”.
Hawkings settled on a split investment of $100,000 for 24 months at 7.6 per cent interest, and $50,000 for 12 months at 6.2 per cent.
On February 2, he made a $150,000 online transfer from his Westpac account to an ASB account specified in an HSBC-branded “wire transfer” notice emailed by the scammers.
Hawkings admits he received several security alert messages from Westpac to verify the payment and confirm it was not a scam.
He was certain the investment was legitimate and even more confident because the money was not being wired offshore.
“I thought, ‘New Zealand banks, New Zealand money. This is a sound investment.’
“But the whole thing was a very elaborate scam.”
The scammers confirmed Hawkings’ money had been received and offered him the chance to increase his allocation, which he declined. He was told his bond certificates would be sent within seven days.
But when the certificates did not arrive, he tried calling Willow about two weeks later. The number was disconnected.
Hawkings contacted Cliffe, who instantly smelled a rat. Cliffe called HSBC’s main number and was told no one by the name Mike Willow worked for the bank and they had “no such investment”.
Cliffe said HSBC said other people had also contacted the bank about the eco bond scam.
Both HSBC and FMA have now updated their websites with scam warnings.
Hawkings said he was devastated to learn it was a ruse.
“Gutted, absolutely gutted, because our conversations were, ‘There are a lot of scams going on’. We didn’t expect to be scammed on the first transaction.
“I’ve worked hard on my business and here’s my bloody hard-earned work straight down the drain.”
Hawkings claimed Westpac provided little information about its investigation or what efforts it had made to track the stolen money.
Westpac’s response was that he’d authorised the payment and it therefore had no responsibility, Hawkings claims.
He also contacted ASB but was told it could not provide details about the recipient due to privacy rules.
“The scammer is one step away so you can’t touch him,” Hawkings said.
Hawkings has gone to police and lodged a complaint with the Banking Ombudsman.
Then in March, a mystery $944 payment arrived in his account from ASB with the notification “fraud reversal”. He received no other update about the payment from either bank.
Hawkings doesn’t expect to see the rest of his money. He said the scammer’s level of deception was remarkable and he was speaking out to warn other Kiwis looking for investments.
“The baby boomers, whom I’m one of, we’re all cashing in, we’re in the same bloody boat. We’ve got a pocket full of money and we want to enjoy our retirement.
“And then bloody bastard scammers come along and stuff it all up.”
Cliffe said that upon learning the bonds had not arrived and Willow was uncontactable, he knew the money was gone.
“I thought, ‘Oh shit, this is a scam’.
“It was quite a sophisticated investment scheme. They had attractive brochures that looked very credible.
“They had telephone numbers where you got answered by a secretary as if it was HSBC. You got put through to a financial adviser who would answer questions like they were a pro. To do that requires some coordination.”
Cliffe now believed the local phone numbers were routed overseas to where the criminals were likely based.
He said the rise in scamming cases raised questions about banks’ security arrangements, their efforts to track stolen money, what assistance banks were giving police, and whether proper anti-money laundering checks were being done on recipient bank account holders involved in scams.
In his opinion, banks were hiding behind privacy rules to shield themselves from liability. Getting information from them was like “a black hole”.
Westpac NZ head of fraud and financial crime operations Peter Barnes said losing money through fraud was deeply upsetting.
Hawkings asked to increase his daily transaction limit on February 2 to pay for a bond, Barnes said.
He was warned it could be a scam and that retrieving the funds would be difficult if they were sent to a scammer.
“Mr Hawkings confirmed he was taking responsibility for the payment. We then sent Mr Hawkings an email about scam awareness, which he has acknowledged he read.”
The subsequent $150,000 payment was authorised by text message.
After being alerted to the scam on February 27, Westpac immediately tried to recover the money from ASB but only $944 was retrievable.
ASB told the Herald it placed a hold on the recipient account within 10 minutes of being alerted to the fraud and requested recall of the funds.
ASB was yet to receive a police production order, which would allow it to share customer information without breaching the Privacy Act.
The bank took its anti-money laundering obligations seriously and had stringent processes for “on-boarding” customers.
An HSBC spokesman said anyone with questions or concerns related to HSBC New Zealand should contact HSBC staff “or visit our website for guidance”.
Police said the fraud was reported on March 1 and inquiries were under way to identify those responsible.
However scammers behind these schemes usually resided overseas, which posed challenges around enforcement action.
Banking Ombudsman Nicola Sladden said the financial and psychological impact on people caught up in scams was significant.
When people sent money to criminals in investment or romance scams, the sending bank was unlikely to be liable if it had acted on the victim’s instructions.
“However, banks have a duty to provide banking services with reasonable skill and care - including having reasonably robust security systems - and may be liable if they fail to detect warning signs of a scam.”
Many recent scams were incredibly convincing and might not display any red flags, Sladden said.
Customers who were unsatisfied with a bank’s handling of their reimbursement claims could make a formal complaint to the bank or Banking Ombudsman.
TIPS TO AVOID SCAMS
• Scams continue to evolve and use more sophisticated methods to deceive the public – the age-old saying “if it sounds too good to be true, it probably is”, is a good rule of thumb.
• Police encourage people to research “broker” companies online before engaging with them.
• Scammers will pose as brokers for a number of established banks.
• The Financial Markets Authority publishes the names of suspicious companies on their website.
• Always talk to your bank or another financial professional before making large online investments.
• If returns are higher than usual,it’s probably a red flag. Do your research and make sure the website is legitimate.
Source: NZ Police