National Australia Bank Ordered to Pay $140,000 in Compensation Over Extortion Scam
The National Australia Bank (NAB) has been ordered to pay compensation of $140,000 plus interest to a customer who suffered financial loss due to a sophisticated extortion scam. This significant compensation payment may be the largest ordered by the Australian Financial Complaints Authority (AFCA) in connection with a scam.
Fraudulent Scheme Involving Impersonation of Chinese Officials
The scammers involved in this case posed as Chinese government officials, manipulating the complainant into believing she was a victim of identity theft and was facing serious criminal charges in China. AFCA provided details of this elaborate scheme in a recent determination, explaining that the complainant was subjected to constant monitoring, harassment, and manipulation.
The fraudsters issued counterfeit arrest warrants and threatened the complainant with deportation unless she paid bail to the supposed Chinese authorities. This led to the complainant selling her investment property, using her savings, borrowing funds, and even getting a salary advance from her employer to meet the scammers’ demands.
“The scammers’ tactics isolated the complainant from family and friends and convinced her that she must not disclose her communications with the scammers to anyone,” AFCA noted.
NAB’s Role in the Scam
Despite NAB staff raising suspicions and red flags surrounding the transactions, AFCA found that the bank’s inquiries were inadequate, particularly around three high-value disputed transactions. The first of these was for $250,000, and the victim was scammed out of a total of more than $500,000.
AFCA stated that branch staff should have reasonably been aware that the first disputed transaction was unusual for the complainant, as her account information showed she had not previously transferred funds overseas. Moreover, the complainant’s first overseas transfer was a large payment to a region known for scam activities.
AFCA further noted that the bank should have been aware of an increased incidence of extortion scams originating in China, given a warning about this scam typology published by the Australian Competition and Consumer Commission (ACCC) in September 2023.
Insufficient Inquiries by NAB
The panel observed that simply inquiring about the transaction’s purpose and observing behavior were insufficient measures. The staff should have asked more probing questions to rule out known scam typologies. They should have questioned the relationship between the payee and complainant, whether the complainant had been contacted to send these funds, and how she had obtained the recipient’s account information.
AFCA pointed out that making multiple large transfers in a short period is generally viewed as a potential scam indicator. However, there was no record of the bank asking the complainant to explain why she was making two payments.
AFCA’s Decision
AFCA ultimately decided that NAB should bear 10% of the financial loss from the first disputed transaction, 25% of the financial loss from the second disputed transaction, and 100% ($70,000) of the financial loss from the third disputed transaction.
Additionally, NAB was ordered to pay $5000 compensation for legal expenses that the complainant incurred and $3000 compensation for non-financial loss.
This case serves as a reminder of the importance of banks maintaining rigorous anti-fraud measures and their responsibility to protect their customers from scams. It also highlights the necessity for customers to be vigilant and to question any unusual transactions or requests.
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