BNZ ordered to refund customers in CitiBank scam

The Banking Ombudsman has ruled that BNZ must reimburse nearly $300,000 to two victims who lost $430,000 in a Citibank-branded investment scam, finding that the bank missed crucial warning signs and failed to act with due diligence.

Victims Borja Ares and Carla O’Neil, who lost $330,000 and $100,000 respectively, argued that BNZ did not detect obvious red flags associated with the scam, legacy media reported. The Ombudsman determined BNZ was “substantially more culpable” than the victims, having overlooked multiple indicators of fraud, including deviations from standard financial transaction patterns and the fact that Citibank does not offer such financial services to retail clients in New Zealand.

This decision comes amid increased scrutiny on banks’ abilities to detect and prevent scams, highlighting the need for improved fraud detection systems and customer safeguards.

The victims, part of a larger group affected by similar scams, have called for compensation and better banking industry standards to protect consumers. The Ombudsman’s recommendations for BNZ to reimburse Ares and O’Neil 70% of their losses marks a significant precedent, potentially influencing how future cases of this nature are handled.

Despite BNZ’s initial refusal to accept liability, citing that the transactions were initiated and authorised by the customers without evident scam indicators, the outcome underscores the growing expectation for banks to exercise greater vigilance and responsibility in identifying and preventing financial fraud.

The case also reflects broader concerns over the security of New Zealand’s banking system and the ease with which offshore scammers can exploit ‘existing vulnerabilities’.