Julian had discovered that his (now ex-) partner had stolen $50,000 from his KiwiSaver account. In the years since Julian turned 65, his partner had been regularly withdrawing small amounts and transferring the money to her own bank account. The money was gone, and there was very little chance that Julian could recover it from his ex-partner. Julian was distraught, and thought his KiwiSaver provider should have done more to protect him.
Julian’s first $30,000 KiwiSaver withdrawal was legitimate – he had provided proof that he owned the bank account the money was being paid into, and he had gone to a Justice of the Peace to have his signature on the application witnessed. He had met all the KiwiSaver provider’s requirements for a first withdrawal application, so they paid out $30,000 to him without issue.
But over the next few years, Julian’s partner had been regularly submitting fraudulent withdrawal applications. Every few months, she would fill out a new withdrawal application, forge Julian’s signature, and withdraw a few thousand dollars into Julian’s bank account. Once the money arrived, she would siphon it from Julian’s bank account to her own.
Julian had not noticed the withdrawals because his partner had a large amount of control over his finances. His partner handled the household expenses, and she had arranged things so that Julian’s bank statements were being sent in paper form to a different address.
Dispute
Julian felt let down by his KiwiSaver provider. He thought they should have done more to protect him, and that they should have been able to catch the fraudulent withdrawals and warn him.
The KiwiSaver provider had a great deal of sympathy for Julian, but they did not think they were responsible for identifying the fraud. They said they had several safety measures in place – they said they would have contacted Julian directly if the withdrawals had been to a new bank account, or if they had been for a suspiciously high amount. But this particular fraud looked as though it had been deliberately carried out so that it would not trigger any of their red flags or safety measures.
Review
We contacted several other KiwiSaver providers, to see whether the fraud identification measures in this case were up to industry standards. All of the providers we spoke to said they had very similar safety measures, and none of them would have caught the fraud.
They all said that there are very strict requirements around a person’s first withdrawal – the KiwiSaver member need to have their application witnessed by a Justice of the Peace, and they need to prove that they own the bank account the funds are being transferred into.
But when it comes to subsequent withdrawals, none of the KiwiSaver providers had very extensive idenitity verification measures in place. So long as the money is going to the same bank account as the initial withdrawal, the KiwiSaver provider will not have any reason to double-check the transaction.
Tne KiwiSaver provider said that they call members whenever they make a withdrawal over $5,000, but that was quite unusual, and even that safety measure would not have caught the small, regular withdrawals from Julian’s KiwiSaver.
Resolution
We talked to Julian, and told him that his KiwiSaver provider seemed to have met the industry standards for fraud protection. They had also complied with all the relevant laws and regulations for KiwiSaver withdrawals. We explained that, in our view, it looked like this fraud would not have been caught by any KiwiSaver provider.
Julian was disappointed, but he accepted that his KiwiSaver provider was not responsible for catching the fraud. He agreed to discontinue his complaint.
Insights for consumers
KiwiSaver providers have measures in place to spot fraudulent withdrawal applications. But those measures can only go so far.
If you give someone control over your bank accounts, you are taking on a significant risk. If someone can access your bank account, they can take your money, and there’s likely very little your bank or your KiwiSaver provider can do to prevent it.
You can help stop this sort of fraud by regularly checking your bank statements, even if you have no reason to suspect anything is going wrong. If you see any withdrawals or deposits you don’t recognise, contact your bank to look for an explanation.
