Our scammer lives in Dubai but police can’t follow the money

“We were told the money cannot be traced.” This is a victim of investment fraud speaking, someone who lost everything. Emotion is high and it’s impossible not to feel it.

“We know our scammer lives in Dubai. We have traced him. It’s ridiculous. How do we know this, but the police are saying they can’t follow the money. It’s just not good enough,” the victim says.

I’m in a meeting where police are gripped by every word being said. They invited a group of victims to a Fraud Working Group and they want the raw truth.

“He’s living the high life in Dubai and he’s got mansions and cars. Here we are, having to start all over in our forties. It’s not OK.” Voices are edged with a tremor.

Police explained the jurisdiction issues they have with a place like Dubai and talked about an International Fraud Conference of Five Eyes and G7 countries. We are sending a minister to it next month. They were acutely aware of their under-resourcing.

Banks could learn a thing or two from Police about fronting up. Big-brand investment fraud is only possible because our payment system doesn’t confirm that the account name we input matches the account number. Criminals are targeting New Zealand banks, due to this flaw. Anyone can be tricked and banks don’t warn us (despite the Banking Ombudsman asking them to six months ago).

The money mule is paying for private school with my money

The criminals who set up investment scams live offshore, but they’re only able to operate with the help of local Kiwi criminals. Cut off the mules and we inhibit the scammer. That’s where our banks have started to focus, but it’s only on a best-efforts basis with no obligations, when they’re self-regulated.

Right now, the mules are winning.

Another victim explains, “it’s money for my children’s education. It’s money for a house for my children. Instead, it’s gone into the hands of a person who was already up on money laundering charges from a year earlier. Yet police and the banks never worked together to put any checks and balances on his banking activity. Now his children are going to an Auckland private school with my money.”

In these cases, money mules funnel the stolen cash through New Zealand bank accounts to their well-spoken British masters, with perfectly cloned term deposit and bond documentation.

Life savings are lost, often proceeds of a house sale, house deposits or inheritances. All the cases I’ve seen have been between $100,000 and $1 million.

One victim succinctly highlighted the inadequacies of banks who harbour these money mules.

“There’s suspicious activity out there which isn’t monitored. Convicted money launderers have got bank accounts that are not monitored. People open bank accounts and they don’t even check their criminal history. It just blows our mind that it’s got to this point.”

They were incredibly upset about banks’ failures. “He stole a $1m from a person. Completely shattered that person’s life. Banks were obviously aware of that. Police were obviously aware of that. A year later he went on to do it to eight other people and steal another $800,000. How does that happen?

“The anti-money laundering rules in New Zealand are an absolute waste of time.”

Then there’s the mules who keep all the money

“My mule never had any intention of sending the money overseas. It remains in New Zealand and he deposited all of it with a group of companies that he owed money to. So that money stayed in New Zealand and absolutely nothing has been done by the police to recover the money. I was literally told by the police it’s a banking matter and the police have no authority over banking issues like that. Personally, I’m not sure how it differs in any way from a stolen vehicle or other stolen property.”

And the banks and regulators who are slow to report scams

“When I raised my scam with ASB bank in February last year, it took six months before an official warning of that scam was posted on the FMA [Financial Markets Authority] website. How can we do due diligence on scams we don’t even know exist and are not being made public.”

Where has the system failed?

Our banks: They’re at the frontline, in the one position where crime can be stopped, but only have to “report” suspicious transactions. They have the ability to freeze accounts in their terms and conditions, but choose not to. Police have to get a court order. That takes a month and the money is gone.

Reserve Bank: Can only check if a bank reports suspicious transactions to police, as that’s all the law requires. It’s a data dump. They suggest banks check media reports for names of known fraudsters as part of their due diligence before opening accounts, but can’t enforce this either. Recently they said checking media reports was probably too onerous on banks.

Financial Markets Authority: Doesn’t regulate banks’ conduct in the area of payments or bank accounts. They’ve got no jurisdiction.

Anti-money laundering law: The law is a light touch on bank security, involving reporting, with no required action.

Banking Ombudsman Service: Won’t let victims complain about a bank harbouring a money mule. We have no idea if the bank ignored red flags. They say it’s outside their jurisdiction. Their terms of reference could be changed to allow it, but it needs 75% of their five-member board to agree. With two bank chief executives on the board, it can be blocked.

Janine Starks is the author of www.moneytips.nz and can be contacted at moneytips.nz@gmail.com. Readers should always seek specific independent financial advice appropriate to their own circumstances.