TSB Bank blocks independent investigation after staff help customer send $1m to scammers

• TSB Bank blocked an independent investigation into how staff helped Steven Fan send $1 million to scammers.
• Fan accuses TSB of avoiding scrutiny by refusing to waive the Banking Ombudsman’s $500,000 threshold.
• TSB defended its actions, saying there were no fraud indicators and it believes court action is the preferred method of review.

TSB Bank has blocked an independent investigation into how staff helped an elderly customer send $1 million to scammers.

The Herald has obtained recordings of several phone calls in which trained banking professionals assist Northland pensioner Steven Fan to transfer his life savings to thieves.

In the recordings, there appears to be no mention of the possibility of a scam. At times, Fan sounds vulnerable and confused.

He told the Herald he is devastated TSB is refusing to waive the Banking Ombudsman’s $500,000 financial threshold to allow an independent probe into TSB’s actions. He believed this was the last avenue he had to recover any money.

Fan accused the bank of trying to avoid public scrutiny and sidestepping potential compensation orders if it was found to have missed crucial red flags.

“It’s obfuscation. If they’ve got nothing to hide, why are they trying to evade the Ombudsman?”

TSB is defending its actions, saying there were no “indicators to suggest fraud or obvious customer vulnerabilities” when Fan made the payments.

Given the amount involved and the “complex and technical” nature of the scam, the bank believed it was more appropriate for Fan to seek review through the courts.

Fan, 69, is a Kerikeri retiree who cares fulltime for his sick wife. He was cold-called in late 2022 by a man purporting to be an investment broker for Magnitude Financial.

Fan agreed to invest $1m, which he and his wife had saved while running an English language school in Taiwan.

Auckland businessman Carel Johannes Viljoen, 61, was found guilty of two counts of money laundering in connection with the scam. Photo / Alyse Wright

He thought he was buying low-risk bonds with the Commonwealth Bank of Australia. In fact, the funds ultimately went to an Auckland Westpac account controlled by South African businessman Carel Viljoen.

The Beca costings professional was found guilty this year of money laundering in connection with $2m, which was stolen by scammers from Fan and another elderly victim in Rotorua.

Viljoen claimed he thought he was part of a legitimate business venture, alleging that Westpac gave him clearance to move the money overseas.

But a jury found he was reckless as to whether the large payments coming into his account were the proceeds of crime. He could be jailed for up to seven years when he is sentenced next month.

‘I want to make a transfer of almost $1m’

During the trial it emerged that Fan made two $1m payments to the scammers, though the bank successfully recalled one.

TSB staff helped him make the first by outward telegraphic transfer to an Australian bank in late December 2022.

But days after the money left Fan’s account he realised the so-called bonds investment was not jointly registered in his wife’s name. He contacted the man pretending to be his broker, who instructed Fan to ask TSB to reverse the transaction.

The scammers then sent payment instructions for Viljoen’s Westpac account. Again, TSB staff helped him transfer $1m by phone.

After Viljoen’s trial, Fan requested copies of the recorded phone calls from TSB under the Privacy Act and provided them to the Herald.

In the first recording, he tells staff he needs to reverse the initial $1m transfer as his broker “made a mistake”.

The staff member reminds Fan that the money has now left his account and it’s unlikely TSB will be able to get it back unless the recipient agrees to return the funds.

Steven Fan has accused TSB Bank of trying to avoid public scrutiny after he lost $1 million in an investment scam.

The recovery application was ultimately successful.

Then on January 13, 2023, Fan calls TSB again to make his second payment.

“I want to make a transfer of almost $1m to my broker who’s buying some bonds from the Commonwealth Bank of Australia,” Fan says.

He explains the money was originally sent to an Australian account, but because of an error, it is now being sent to his broker’s New Zealand “escrow” account.

The staff member says she needs her manager to call Fan to finalise the payment because of its size.

Fan then emails the staff member payment instruction documents provided by the scammers. On receiving the documents she says,

“It looks like everything I need”.

She continues: “So you mentioned that you’re transferring these funds to Magnitude Financial and you will be buying bonds from Australia. Is that right?”

Fan replies: “Yes at the Commonwealth Bank of Australia, but it has to be sent to a New Zealand account.”

TSB responds: ‘This is not a decision we made lightly'

The Herald asked TSB why Fan’s apparent vulnerability combined with his cancellation of the earlier $1m payment did not trigger any red flags.

We also asked whether he was warned about the possibility of a scam and if staff interrogated him about why money for a supposed Australian bank bond investment was being sent to a Westpac account in Auckland.

TSB general manager customer delivery Penny Burgess said staff had several discussions with Fan about the investment. They asked him to confirm what the payment was for and received a “consistent response”.

“We made further inquiries ourselves internally, which included reviewing the payment invoice. In these inquiries, based on what we knew about the fraud landscape that applied at that time, we didn’t identify any indicators to suggest fraud or obvious customer vulnerabilities.“

Burgess said Fan’s loss was nearly twice the Banking Ombudsman Scheme’s financial limit. The scheme’s terms and conditions prevented investigations over this threshold unless both parties agreed.

“In this instance, we declined to agree.”

Given the significant value of the loss and the “complex and technical nature” of the scam, TSB believed it was “more appropriate” for Fan’s claim to be considered by the courts.

“This is not a decision we made lightly. The impact this has had on Mr Fan has been front of mind for us throughout this process. That’s why we believe it would be best dealt with in a more appropriate setting to achieve an outcome that is fair to all parties.”

Banking Ombudsman Nicola Sladden confirmed her office did not have jurisdiction to investigate Fan’s complaint, as his loss was above the scheme’s $500,000 threshold and TSB had refused to waive the limit.

Sladden suggested asking TSB about its decision to block an independent review by her office.

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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