Reeling in the country’s financial fraudsters
The woman fighting NZ’s con artists
New Zealand’s market watchdog issued more than 100 scam warnings over the past 12 months. The ongoing battle by the Financial Markets Authority (FMA) has provided Kiwis with a virtual encyclopaedia of the scams and rorts doing the rounds online.
Most of these schemes won’t hit the front pages, but the collective harm they do is being felt around the world.
An annual report from online fraud researcher Chainalysis showed that global cryptocurrency-related crimes alone accounted for an accumulated US$10 billion ($13.8b) in 2020.
More than 54 per cent of that loss to illicit activities was attributable directly to online scams, often promoted across many national borders.
It’s hard to know how much New Zealanders are putting into such scams, but you rarely have to look far to find the next bright opportunity. Investing has never been easier, and that means it’s never been easier to lose money to something that seems like a great idea on Whatsapp or Facebook.
Standing at the forefront of this battle, with its shifting rules and even shiftier characters, is Karen Chang, the head of enforcement at the FMA.
Chang doesn’t fit the Hollywood stereotype of a prosecutor — a weathered man carrying the weight of the bureaucracy on his shoulders. But don’t let the affable personality, broad smile and enthusiasm fool you. She’s as tough as lawyers come and isn’t afraid of the role she’s been appointed to do.
“If you think about the carrot and the stick equation, we’re the stick,” Chang said. “The enforcement function is really important for deterrence . . . If there aren’t any consequences for those who
don’t follow the rules, then people wouldn’t do it.”
Formerly a New York-based commercial litigator working for major Wall Street clients, Chang returned to New Zealand several years ago to become a Crown prosecutor.
Her growing reputation and strong track record saw her appointed to the role of head of enforcement at the FMA in 2017.
The challenge facing the FMA these days is that the reach of its stick doesn’t always extend to the perpetrators who orchestrate audacious online scams. Once money leaves our shores for a scam artist abroad, victims rarely have any recourse locally.
“This is why we’re very vocal about New Zealand investors investing in New Zealand businesses and dealing with New Zealand residents because that’s where our jurisdiction lies and that’s where we can take action,” Chang says.
That action can mean the difference between investors losing everything and getting at least some of their money back.
To make this point, Chang refers to the FMA’s actions in its case against notorious fraudster Steven Robertson.
Robertson ran an elaborate scheme, telling investors he was “as good as John Key” at trading and convincing them to hand over funds, which he would then use to trade on their behalf.
But rather than invest, Robertson used the money to fund a lavish lifestyle that included cars, frequent travel and a private helicopter.
In that case, the FMA used its powers to freeze Robertson’s assets and subsequently seized his house, jewellery and a variety of other items of value — which in turn ensured the victims were able to get something back at the end of it all. Had Robertson been a foreign resident, New Zealand investors may have had to rely on an international regulator to recover their funds.
To counter this problem, Chang says there’s growing collaboration between the FMA and international securities regulators who will refer matters to each other based on their jurisdiction.
This helps to ensure crimes don’t go unpunished, but it’s rarely as effective as a local regulator taking action at home.
Given its structural position straddling the regulatory and enforcement worlds, the FMA has the power to pursue either criminal or civil proceedings against an offender.
Chang says the decision is often determined by the nature of the offence, the need to deter that type of offending and the strength of the evidence.
“There’s a higher standard of proof in criminal prosecution, which requires us to prove knowledge or intent,” she says, adding that the FMA is also bound by strict guidelines set out by the Solicitor General. Criminal prosecutions are generally reserved for the worst offenders, and the last two decades have illustrated that large-scale financial crimes can carry some hefty penalties.