Recorded phone calls capture the moment TSB staff help customer Steven Fan send $1m to scammers.
TSB bank is accused of using a scam victim’s financial hardship to avoid liability for his $1 million loss.
The bank blocked a Banking Ombudsman investigation by declining to waive the $500,000 threshold.
Critics argue TSB should allow an independent probe, rather than leaving the victim with the only option of costly court action.
TSB bank is accused of using a scam victim’s financial hardship to avoid potential liability for his life-changing $1 million loss.
The bank has blocked an independent investigation by the Banking Ombudsman into its handling of the case by declining to waive the dispute resolution scheme’s $500,000 threshold.
TSB claimed the scam case was too “technical and complex” for Banking Ombudsman investigators and said it would be fairer “to all parties” for any review to be conducted by the courts.
This would effectively mean Northland retiree Steven Fan engaging lawyers to take High Court proceedings against a bank, when he had just lost all his money to fraudsters.
Consumer NZ spokeswoman Jessica Walker described the case as extremely upsetting.
In fact his money went to fraudsters via a Westpac “mule” account controlled by Beca costings professional Carel Viljoen, who was found guilty of money laundering and faces up to seven years in prison at sentencing next month.
During the trial, it emerged that Fan made two $1m payments to the scammers.
TSB staff helped him make the first by outward telegraphic transfer to an Australian bank in December 2022.
But days after the money left Fan’s account he realised the so-called bonds investment wasn’t jointly registered in his wife’s name and he successfully recalled the payment.
Beca costings expert Carel Johannes Viljoen was found guilty of two counts of money laundering and is due to be sentenced next month. Photo / Alyse Wright
The scammers then sent payment instructions for Viljoen’s Westpac account. Again, TSB staff helped Fan transfer $1m by phone.
After Fan realised he’d been duped, police requested information from TSB about the scam as part of their investigation but never received a reply. TSB later admitted it had dropped the ball.
Fan complained to the Banking Ombudsman, claiming TSB hadn’t conducted sufficient checks before processing his payment and that it had missed crucial red flags of a scam.
While his $1m loss was twice the scheme’s current $500,000 threshold, the Banking Ombudsman could investigate if both parties agreed.
However, TSB refused, saying there were no “indicators to suggest fraud or obvious customer vulnerabilities” when Fan made the payments.
Given the amount involved, the bank believed it was more appropriate for Fan to seek review through the courts.
‘A disco of warning signs’
Financial commentator and former fund manager Janine Starks was scathing of TSB’s actions, accusing it of being “purposely disingenuous” to avoid liability.
She said the scam was no more technical or complex than any other the Banking Ombudsman regularly investigated.
“In fact, it is identical in nature.”
While the quantum was over the limit, TSB could easily allow an independent probe.
Not doing so spoke volumes about TSB’s motivations, Starks believed.
“We have an ordinary customer, who has no ability to fund a court case or an appeal by a major bank and that’s being preyed on.
Financial commentator and former fund manager Janine Starks believes TSB is trying to avoid potential liability for the victim's $1m loss.
“My gut feeling is TSB want to avoid the Ombudsman applying the good banking practice rule that a bank cannot turn a blind eye to a scam. They would rather the courts looked strictly at the bank’s obligation to follow payment instructions.”
Had the Banking Ombudsman been allowed to investigate, Starks believed Fan could be in line for compensation because staff had actively helped him send the money.
In recordings of those phone calls, obtained by the Herald, Fan sounded confused and vulnerable. Starks felt staff should have done more to warn him about potential fraud.
Northland retiree Steven Fan thought he was investing in low-risk bonds with the Commonwealth Bank of Australia. But it was all a scam.
Of particular concern was the payment going to an Australian account for bonds, before being recalled and the destination changing to a NZ bank.
“That’s a mighty strange turn of events when buying an investment. It doesn’t take a lot of banking skill for TSB to question this more deeply.
“Instead their staff effectively walked through a disco of warning signs and claimed they didn’t see the flashing lights. To a financial eye, this case has liability avoidance written all over it.”
‘Catastrophic for me’
The Banking Ombudsman has written to Fan saying its preliminary decision that it has no jurisdiction to investigate will become final on May 30.
He wrote back asking for more time while he sought banking records from TSB under the Privacy Act.
Closing the case too early would be “catastrophic for me given the amount at stake”.
Banking Ombudsman Nicola Sladden.
However, the Banking Ombudsman declined to grant a further reprieve.
“If in the future you had relevant new evidence regarding your complaint and our financial limit (such as TSB’s agreement to us considering your complaint), we would be happy to review and reassess whether we have jurisdiction.”
TSB general manager customer delivery Penny Burgess said the payment occurred 2.5 years ago, which contributed to the complexity of the dispute.
TSB empathised with Fan and said the impact of the fraud on him had been a key consideration.
“However, there are sound reasons supporting the limitations for what can be considered by the Banking Ombudsman Scheme compared to what can be considered by the courts, including financial limits, evidential processes, appeal rights and the application of legal rules.
“This is why we believe it’s not the right forum to consider disputes of this magnitude and complexity.”
Lane Nichols is a senior journalist and Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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