Foreign scammers target top achievers
High achieving New Zealanders are being targeted by investment scammers who set up companies and bank accounts in Hong Kong, says a fraud expert.
Bronwyn Groot, the fraud education manager at the Commission for Financial Capability, who previously worked in a major bank preventing fraud, says the vast majority of investment scam money she sees is ending up in Hong Kong, and the problem is growing.
Groot has weighty files on scam victims who have either contacted her directly or have been referred to her from other regulators.
The victims have things in common — they are typically male, older and have been in top corporate roles. “This one is a pilot, this one was a CEO and this one owned his own business,” says Groot.
The victims were all cold-called by companies purporting to offer share investments, sometimes in legitimate businesses that are running share offers at the same time.
“The investment amount starts small — US$5000 ($7380). The person says: ‘Oh, I can afford to lose that’. And then they are told they will need to keep investing more money if they want to see a return which never eventuates.
“They baffle them with ‘BS’.” Victims don’t want to question the caller because they don’t want to appear silly, she says.
Groot has traced the money back to companies and bank accounts, and found common links among a group of New Zealand scam victims.
She says typically a shell company is set up in Hong Kong, with its address usually linked to a business management office. A local director is listed for the first few months, then that person is swapped, often for a British or European national — she knows this because their passport number is on the application.
Groot says many of these shell companies use the same bank accounts, also based in Hong Kong.
“Some of the accounts are based in Japan or Singapore but mainly it is Hong Kong. Some companies were opened in Japan but the money still went to Hong Kong.”
Groot believes it may be looser legislation that allows the companies to be set up so easily in Hong Kong.
Kiwi victims typically use telegraphic transfer to send money and are often asked to split it across five or six banks accounts, with the reasoning being that there is an escrow limit on each account.
Groot believes banks could do more to question why a customer wants to send a large amount of money overseas. “Surely it comes back to the banks to understand why they are sending this money?”
Anti-money laundering legislation means all overseas transfers over $1000 have to be reported to the Police Financial Intelligence Unit, as well as transactions or activity deemed to be suspicious.
In three months to September 30,
2018 — the latest data available — there were 1.13 million international fund transfers valued at over $1000.
At the same time the banks made
1697 suspicious activity reports. Money remitters also made 693 such reports.
“I would like to see them question when they see banking out of the ordinary,” said Groot. “Ringing the customer and asking to see the documents. None of these victims have investment experience.”
Banks are reluctant to talk about what they do to prevent investment scams, for fear of tipping off the scammers.
A BNZ spokesman said: “Because the methods fraudsters use are always changing and they pay a lot of attention to what we say on this topic, [we] can’t go into specifics without risking alerting them to the things we do to stop or interfere with their activities.”
He said BNZ did a lot to prevent fraudulent and illegitimate transactions, and the bank had a team dedicated to this work.
“We have measures in place to stop the transfer of funds in these situations, both out of the customer’s account and out of the country.
“We work with the police on a range of matters, and they share information with us from time to time.”
An ANZ spokeswoman said bank personnel could not talk in detail about its security arrangements.
“The financial services industry has seen a rise in the number and sophistication of scams over the past year.
“In response, we actively monitor payments, looking for risks as best we can — given the large number of payments we process.”
The spokeswoman said the challenge for all banks was that these payments were made by customers who believed they were dealing with legitimate entities.
“We’re putting significant effort into helping customers understand how scams work, what to watch out for and how they can protect themselves.”
An ASB spokeswoman said customers’ security was a priority for the bank and it continued to invest in it.
She said the bank had sophisticated fraud detection systems that helped prevent scam payments and other fraud, including blacklists of known fraudulent accounts.
But it could not point to any particular country as being more of a problem.
“ASB has seen and continues to see a variety of countries as recipients for scam payments and cannot single out any one country as such.”
In the meantime, Groot is dealing with the Hong Kong police in three cases and has helped the victims engage a lawyer.
She has also referred complaints on to the police in the UK to investigate directors who have UK passports.
Some of the bank accounts have been frozen and one of the victims has told her that arrests have been made by the Hong Kong police.