In 2022 Jack received an email from an investment firm. The email said that the firm provided its customers with a self-directed investment account that enabled its customers to trade regulated financial instruments (stock, CFDs, binary options and commodity derivatives).
Jack had just come into some money and the option of investing the money had crossed his mind, so, Jack clicked on the website link, did a bit of research, and read previous clients’ reviews and successes. Jack was happy with what he read and approached the firm to make further enquiries.
After signing up, Jack was given access to a purported online trading portal. The portal offered Jack the opportunity to trade dummy shares. Jack was amazed with the accessibility of the online portal and the success he was having with the dummy shares he was given to play around with.
Based on his experience with the portal, Jack authorised the payment of $160,000 to his trade account. Because the firm was based in the United States, Jack had to authorise the transfer of the funds through an online money transfer service.
Three months later Jack realised that he had been a victim of an investment scam and that the trading account was a ‘demo’ trading account through which no real-world trades could be made.
Jack notified the money transfer service and requested a recall of his funds. The money transfer service contacted the intermediary bank and requested a recall from the investment fund’s bank. Unfortunately, all the funds had already been withdrawn from the account.
Jack filed a fraud complaint with the police and also complained to the money transfer service. Jack said that if a recall of his payments were not possible, he wanted the money transfer service to refund the full amount.
The money transfer service did not agree that they were at fault. They said that they apply screening systems to all beneficiaries and confirmed that this investment firm was subject to advanced screening against the sanctions lists and scam watchlists of the relevant regulators, the FMA (New Zealand) and SEC (United States) and that there were no matches against those lists. The money transfer service further said that the scammer was still not listed as a scammer.
The money transfer service offered Jack $600 as a gesture of goodwill.
Jack was not satisfied with the outcome of the complaint and complained to FSCL.
Dispute
Jack complained that the money transfer service had not done enough to identify the scammers and was unhappy with their efforts to recall the money.
The money transfer service said that
- Jack confirmed the payment detail both electronically and in a phone conversation with one of their agents.
- they were not involved in the scheme
- they applied rigorous screenings of the beneficiaries
- they were not liable for lost funds.
Review
We referred to the money transfer service’s terms and conditions, which stated that all customers were responsible for carrying out their own due diligence on the identity of the holder of the account to which they are sending funds. The terms further stated that the money transfer service would not be held liable where a customer fell victim to a scam and where the money service met their obligations under the agreement.
Although we sympathised with Jack, it appeared that this was a very sophisticated fraud. We could not see how the money transfer service could have done anything more or different to prevent Jack from falling victim to the scam, and so we did not think that the money transfer service were liable to refund the payment.
We explained to Jack that once the money had reached the scammer’s bank account, the money transfer service no longer has control of that money.
We suggested that Jack follow up on the progress of his case with the police and that he accept the money transfer service’s offer of $600.
Resolution
Jack was disappointed but accepted our decision and the money transfer service’s offer of $600.
Insights for consumers
Investing money overseas with a company you have never dealt with personally before carries risk. We often see the scammers reach out to consumers first, which is usually an automatic red flag. If you did not request contact from the specific firm, tread very carefully.
Although money transfer services have some protections in place, as the sender of the money, you are best placed to make sure the person you are dealing with is who they say they are and that their business is a legitimate business.
Once the money has been transferred to the overseas scammer’s account and the scammer has withdrawn the money, it is usually impossible to recover that money.
