Speaker 1: Kilda.
Speaker 2: I'm Chelsea Daniels and This is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald. For the
Speaker 2: last few years, our headlines have been dominated by talk
Speaker 2: of ram raids, robberies and gang members misbehaving. Those stories
Speaker 2: have fared through to politics, with the governments making a
Speaker 2: big deal about tackling gangs and cracking down on crime.
Speaker 2: But while these crimes might make for a great photo
Speaker 2: and deliver political sound bites, little is ever said about
Speaker 2: the extent of white collar crimes like fraud and zed.
Speaker 2: Herald investigative journalist Matt Knippett has been reporting on fraud
Speaker 2: and corruption for much of his career. He joins us
Speaker 2: now on the Front Page to discuss the extent of
Speaker 2: it in New Zealand and peticians should pay more attention
Speaker 2: to it. Matt, what are some of the biggest fraud
Speaker 2: cases you've investigated over your career?
Speaker 1: Well, I guess there's a couple of one hundred million
Speaker 1: dollar plus ones. The Beggest was actually the first that
Speaker 1: occurred in my Actually the first week I was a
Speaker 1: business journalist covering the collapse of South Canterbury Finance, where
Speaker 1: it turned out there were some sheneigans on their ballit
Speaker 1: sheet hiding related party loans that you know, if the
Speaker 1: government had known about it, they might not have guaranteed them.
Speaker 1: And that company went under and triggered a one point
Speaker 1: five billion dollar payer. Another particularly large one they covered
Speaker 1: was there was a Clashtreage based an investment banker called
Speaker 1: Kelly Tonkin. He ran an investment firm called Penrich. He
Speaker 1: was said to be doing amazing things with currenty in
Speaker 1: the Cayman Islands, but it turned out to be a
Speaker 1: Ponzi scheme that left a whole bunch of retchless to
Speaker 1: investors more than one hundred million down. Then there's another
Speaker 1: handful that are a sort of fifty million dollar range.
Speaker 1: I've had my finger on most of the big ones
Speaker 1: over the last decade.
Speaker 2: I reckon when it comes to financial cost and victims.
Speaker 2: Does fraud compare with more violent direct crime like burglary
Speaker 2: or assault?
Speaker 1: Well, I mean, how do you work out what an
Speaker 1: assault victim has lost? I mean, often it's not money,
Speaker 1: and most file assaults are sort of occur late at
Speaker 1: night when the parties are drunk, and usually it's not
Speaker 1: over cash. A good point of comparison is one people
Speaker 1: most think of financial crime, they think of bank robberies. Right,
Speaker 1: the largest bank robbery in New Zealant history didn't even
Speaker 1: get a million dollars, and it was twenty five years ago.
Speaker 1: If you want to look at sort of the crimes
Speaker 1: that sort of cost and dollar teams more, you're much
Speaker 1: better looking at your investment hucksters and scammers. Who are
Speaker 1: you know, even some of the smaller operators are pulling
Speaker 1: in world more than a million. As I mentioned, you
Speaker 1: know some even manusct up to nine figures.
Speaker 2: When it comes to investigating fraud, I guess it's real
Speaker 2: intricate because generally people who are committing financial fraud they
Speaker 2: don't make it too easy for authorities to find out
Speaker 2: what they're doing. So I bet you've printed out reams
Speaker 2: of paper in your career.
Speaker 1: Paperwork is often are the modus operandi. The thing about
Speaker 1: financial crime is often at crime of consent, guns aren't
Speaker 1: being drawn and people handing over their wallets or emptying
Speaker 1: their purses. These crimes are committed by people who convince
Speaker 1: them to hand it over, usually for an invalid or
Speaker 1: untruthful reason. You know, they say they'll invested somewhere would
Speaker 1: in fact it's just going to pay off the other
Speaker 1: investors that want to get out it's upon this scheme,
Speaker 1: or it's just being tally most appropriated. So that level
Speaker 1: of trust, I mean, this is why they call convent
Speaker 1: because they're confidence men. I haven't yet met at Fordster
Speaker 1: who wasn't charismatic. I mean, you've got to be good
Speaker 1: to convince people hand over the hard and pass. Then
Speaker 1: of course that does complicate things because often people don't
Speaker 1: want to acknowledge they've been tricked and lost money. Certainly
Speaker 1: they don't want anyone else to know that they've been
Speaker 1: foolish or taken in. There's a certain amount of shame.
Speaker 3: Nationally, there'll be hundreds of cases a day being reported
Speaker 3: to police, and we know that not all thought has reported,
Speaker 3: so the scale of it is truly massive.
Speaker 1: I never thought it never happened to me. I was
Speaker 1: pretty upset. I didn't know which way to turn. That
Speaker 1: money saved up with my grand order and the son
Speaker 1: and his wife.
Speaker 3: So how much money did you lose in this?
Speaker 1: For and dearly there are commercial consequences, you know, if
Speaker 1: your bank realizes that, you know you've lost a million
Speaker 1: dollars of your businesses money they might want to take
Speaker 1: a closer look at your finances to make sure you
Speaker 1: can replace. There's lots of seven centers not to report
Speaker 1: the sort of crime, which is the first big hurdle.
Speaker 1: The second book hurdle we often come across is money
Speaker 1: that goes offshore, and you know, we live in a
Speaker 1: globalized world. People can set up bank accounts overseas. There
Speaker 1: are supposed to be sort of anti money laundering checks
Speaker 1: in place to ensure that valanci institutions know who are
Speaker 1: setting up accounts for their institutions and where it's being
Speaker 1: transferred to. But once money goes offshore, and it's extraordinarily
Speaker 1: difficult to track, let alone recover. Once people realize that's
Speaker 1: happened to them, often they can't see any prospect of
Speaker 1: getting their money back. So why would you go through
Speaker 1: all the pain that torment of a criminal investigation which
Speaker 1: in all likelihood probably won't even get to trial, and
Speaker 1: even if it does, it's going to drag out for years.
Speaker 1: A lot of people just want to cut their losses,
Speaker 1: and the losses are indeed quite substantial and sort of
Speaker 1: international level.
Speaker 2: When we talk about fraud in New Zealand, how many
Speaker 2: millions of dollars are kiwis losing each year.
Speaker 1: It's sort of a very fungible term fraud. I mean,
Speaker 1: if we sort of look at the sort of the
Speaker 1: economic costs of crime might be a good way to
Speaker 1: look at it. There were some studies that maybe it
Speaker 1: was about ten billion a year. However, it's worth noting
Speaker 1: that the vast majority of that, probably seven or eight billion,
Speaker 1: is just text to avoidance people not paying the tax
Speaker 1: they're required to, either just not paying it and you know,
Speaker 1: when the bills come due, or sort of massaging their
Speaker 1: accounts to make a look as though they don't need
Speaker 1: to pay as much. IOD does have a fairly big
Speaker 1: investigations unit, and they humanly do about They poss get
Speaker 1: about a billion dollars of that a year, so there
Speaker 1: have been some researchers that's the amount that's missed us
Speaker 1: considerably more, and we break it further down. I know
Speaker 1: it's a lot in the news at the moment sort
Speaker 1: of ram raids and retail crime that industry lobby reckons
Speaker 1: that's about two and a half billion a year. So yes,
Speaker 1: a very big number, but still you're looking at only
Speaker 1: a third the amount of text that's going with thing
Speaker 1: and then going way further down, you know, they're sort
Speaker 1: of the scams and frauds are probably in the three
Speaker 1: to four hundred million dollar range, but that number can
Speaker 1: bounce around a lot. As I mentioned before, individual cases
Speaker 1: can run to one hundred million, which can really skew
Speaker 1: each year's figures. And finally, something that does get a
Speaker 1: fair bit of coverage, but it's worth mentioning purely because
Speaker 1: it's so meniscule, is a welfare fraud which you know,
Speaker 1: only about two or three million dollars a year that
Speaker 1: has prosecuted each year. It's a comparative pittance and you know,
Speaker 1: in some total, just a fraction of one of the
Speaker 1: sort of pondee type schemes that might get uncovered in
Speaker 1: a year.
Speaker 2: When we talk about fraud these days, online scams are
Speaker 2: probably where most people's minds go, right. The latest New
Speaker 2: Zealand Crime and Victim survey said that one in ten
Speaker 2: kiw's experienced some level of fraud in the last year,
Speaker 2: double the last period. How sophisticated have these scams become?
Speaker 1: Yeah, this is what I've noticed this myself over the
Speaker 1: last couple of years. You just draw a line between
Speaker 1: the sort of work I normally do at the higher
Speaker 1: end of the pondee is very sort of a narrow
Speaker 1: and sort of deep fraud where a small group of
Speaker 1: victims will get worked over over a number of years
Speaker 1: by an individual, and often the sums involved could be
Speaker 1: really large. What was common five years ago, and I'll
Speaker 1: talk about how has evolved, is that there's also another
Speaker 1: type of operator, usually operating internationally. They're just as a
Speaker 1: very shallow and broad approach. You know, they will spam
Speaker 1: every phone number they can find, every email address they
Speaker 1: can find, and we're trying to get you to pay
Speaker 1: your toll road bill or your parking ticket they claim
Speaker 1: is overdrawn, but in fact the money is going to
Speaker 1: their accounts. I have noticed that that approach has adapted.
Speaker 1: One of the most insidious ones I've seen is scammers
Speaker 1: setting up websites and buying Google ads. So if you
Speaker 1: people are gurgling where's the best place to invest my money,
Speaker 1: they'll have their site comes up, which again doesn't like
Speaker 1: a scam, and it's just a comparison side of interest rates,
Speaker 1: and it allows you to register your email address and
Speaker 1: phone number. If you're interested in talking about your options
Speaker 1: with a financial advisor, and of course you'll soon receive
Speaker 1: a call, but it won't be a financial advisor. It
Speaker 1: will be a scammer. I think I've sprung one of
Speaker 1: these guys along for a couple of months a couple
Speaker 1: of years ago. Extremely well spoken. They're running a professional
Speaker 1: call center and they're recording details and passing them on
Speaker 1: to where it's manning the phones. They've got adopted prospective sys,
Speaker 1: lined up, a whole bunch of official locking forms. You
Speaker 1: fullen and because you haven't been spammed, in fact, you've
Speaker 1: solicited this yourself. People's guards come down and I have
Speaker 1: seen record, and I think the bank's noticing too. People
Speaker 1: have been done out of hundreds of thousands of dollars
Speaker 1: from that sort of approach, and it's quite remarkable. I
Speaker 1: thought there'd be more red flags, but that's sort of
Speaker 1: set up to be honest, and it's very difficult to
Speaker 1: prosecute because although when you're called, your mobile number will
Speaker 1: say it's a local number, perhaps they live in spoofed
Speaker 1: the bank they're claiming to be from, that's all actually
Speaker 1: based offshore. And so the prospect for the New Zealand
Speaker 1: Police or ever the serious thought offers to find out
Speaker 1: who's behind it, let alone and dragged them to New
Speaker 1: Zealand jail. As close to zero.
Speaker 2: Is New Zealand trailing behind in terms of technology and
Speaker 2: education that could stop us falling victim to these kind
Speaker 2: of crimes, Do you reckon?
Speaker 1: I think there's a certain nature to New zeald society.
Speaker 1: We're small. I think we're relatively community focused, and we
Speaker 1: believe each other way too much. We will take sort
Speaker 1: of word of mouth recommendations quite strongly. This leads us
Speaker 1: to be particularly vulnerable to type of fraud called affinity fraud,
Speaker 1: which is often where forster as will target their friends
Speaker 1: and family, or they will recruit people who are then
Speaker 1: drawing their friends and family, and often people's guard goes
Speaker 1: down a bit. Then if your brothers said it's good,
Speaker 1: and he's a lawyer, then I don't need to do
Speaker 1: my own checking. That does leave you quite vulnerable. I'd
Speaker 1: certainly know with the rise and the online investment scams
Speaker 1: that these ones I was talking about where people think
Speaker 1: they're investing money in the bank turned deposit, but actually
Speaker 1: there sending it to dubious agents offshore. There are certain
Speaker 1: steps the banks can take to ensure that when money
Speaker 1: is paid by their clients to a foreign bank account
Speaker 1: that indeed the payer and pay names match. They don't
Speaker 1: do that presently, but it has been rolled out in
Speaker 1: other jurisdictions, and I'm hopeful that New Zealand's banks will
Speaker 1: eventually be able to update their own systems to divide
Speaker 1: her similar extra level of protection.
Speaker 3: Victim advocates say banks should be doing more to protect
Speaker 3: their customers.
Speaker 2: Don't rely on the one fact that just because the
Speaker 2: customer says it makes it right.
Speaker 3: She wants banks to slow the payments down consumer in ZSS.
Speaker 3: Banks around the world are already doing this.
Speaker 1: Yes, New Zealand's banking system is behind.
Speaker 2: Given the pace the New Zealand banking system moves that
Speaker 2: it could be some years before we see this introduced.
Speaker 4: Well, first of all, I've urged them to put in
Speaker 4: place confirmation of pay ye arrangements and the banks have
Speaker 4: committed to them.
Speaker 1: But on the whole it's been interesting in covering the sector.
Speaker 1: It was about ten years ago a whole suite of
Speaker 1: anti money laundering regulations came in which and I'm sure
Speaker 1: people might have run into this when they over the
Speaker 1: bank account. Something you need to prove that you are
Speaker 1: and to bring along passports, best certificates, utility bills and
Speaker 1: some as pain in the ass to be honest. But
Speaker 1: all that was supposed to make it harder for scammers.
Speaker 1: And the harder you make it for scammers, the harder
Speaker 1: you make it for everyday business. So people should perhaps
Speaker 1: be a little bit careful of what they wish for,
Speaker 1: because you know that we're complaints if it's too easy,
Speaker 1: and also complaints if it's too hard.
Speaker 2: You mentioned overseas actors, but what about fraud here in
Speaker 2: New Zealand. How widespread are negative actors in this country?
Speaker 1: Oh? Pretty common. You know, as long as there's an economy,
Speaker 1: there'll be fraud. It is interesting that se like waves
Speaker 1: of fraud emerging usually just following a recession. That's when
Speaker 1: people have asked for their money back. But things get
Speaker 1: a bit tight elsewhere. You know, it's we're further than
Speaker 1: the business traders. Where the tide goes out, you can
Speaker 1: see who's not swimming with togs, and so I suspect
Speaker 1: we will see a lot more of that get exposed
Speaker 1: in the coming years. Look, kiwis have been scamming kiwis
Speaker 1: for a long time. I mentioned the overseas stuff, because
Speaker 1: if you're smart and want to get away with us
Speaker 1: as a fraudster, you don't really want to be in
Speaker 1: the same country as your victims because eventually they will complain.
Speaker 1: And you know, while the jail sentences here aren't as
Speaker 1: long as you get the United States, I think being
Speaker 1: made off read upon Zeschiv in New York and got
Speaker 1: put away for one hundred and fifty years some of
Speaker 1: the bigger fraudsters here have you ended up with ten
Speaker 1: or living your jail terms.
Speaker 2: You mentioned benefit fraud as well, and it's something that
Speaker 2: always gets people up in arms. We all remember what
Speaker 2: happened to former Green Party co leader Mateia two day.
Speaker 2: Is that the most common form of fraud against the
Speaker 2: government or public services or is that a drop of.
Speaker 1: It's just your old fashioned tax evasion. It's contractors taking
Speaker 1: cash jobs and not reporting their income. It's people shunting
Speaker 1: personal expenses into business and claiming deductions. It's not declaring
Speaker 1: second or third incomes. The numbers there are is probably
Speaker 1: you know, seven or eight billion dollars of taxtavation each year,
Speaker 1: and is what two or three million dollars have benefit
Speaker 1: Ford each year? So that's one two thousandth Matt.
Speaker 2: Given how much you've reported on fraud in the past,
Speaker 2: does it bother you that governments have not put as
Speaker 2: much focus on this when they talk about tackling crime.
Speaker 1: Yeah, it's a perennial problem. It is harder the prospect
Speaker 1: to be fair. Unless I found one fraud. There wasn't
Speaker 1: running a sort of an elaborate loan scam. He was
Speaker 1: funding the money for breast and plants for his mistresses,
Speaker 1: and it was bringing along like vintage bottles of French
Speaker 1: champagne to work functions. There are some good stuff in there,
Speaker 1: but it's usually it doesn't get people as outraged if
Speaker 1: you lose a lot of money to a fraud, So
Speaker 1: often you're seen as well, you had that much money
Speaker 1: to begin with, why are we so worried. We did
Speaker 1: see a bit of a sea change in this after
Speaker 1: the global financial crisis, but a lot of the finance
Speaker 1: companies were found to have some fraudulent activities and it
Speaker 1: became clear then that you know, it wasn't just one
Speaker 1: hundred million dollars lost. That was our ten thousand pensions
Speaker 1: who lost their life savings, which is you know, when
Speaker 1: you think of it, that way, that's a that's a
Speaker 1: horrific crime. It's harder to prosecute because you've got to
Speaker 1: build up and reassemble all the financial crimes. It's not
Speaker 1: that we can easily catch, you know, on CCTV, So
Speaker 1: it takes a lot more resources for police. And there's
Speaker 1: also this real gap in the system. With a serious
Speaker 1: Fraud Office which is tidy, you know, a couple of
Speaker 1: dozen staff. They only look at sort of cases five
Speaker 1: million dollars and up. The police often struggle to deal
Speaker 1: with cases that one hundred thousand dollars and greater. So
Speaker 1: there's this real sweet spot for mid level fraud where
Speaker 1: it's too complicated police, it's too small for the CFO,
Speaker 1: and it can take quite a bit of lobby to
Speaker 1: get the action on that.
Speaker 2: What do we do there, how do we get those
Speaker 2: kind of mid level fraud cases more in the spotlight.
Speaker 1: Well, it's probably a matter of either expanding the remitt
Speaker 1: Serious Fraud Office or expanding the capabilities of the zelland police.
Speaker 1: I mean it's as simple as that. I think. I mean, obviously,
Speaker 1: at at the level of bank operations, requiring them to
Speaker 1: keep more information transaction details might be useful. I think
Speaker 1: at the moment they need to keep seven years worth,
Speaker 1: which sounds like an all very long time, but at
Speaker 1: the point where people can play and often these things
Speaker 1: have been running for a considerable period of time, and
Speaker 1: a lot of their big frauds sort of tap out
Speaker 1: when they're trying to quantify them, because simply they don't
Speaker 1: have any idea about what happened, you know, beyond that
Speaker 1: seven year period. I do think it's a political will.
Speaker 1: Oddly enough, well, I'm generally not a fan of harsher sentences.
Speaker 1: A white collar crime does seem to be one of
Speaker 1: the crime types that are affected. The people committing these
Speaker 1: crimes are for just tend to be quite deliberate in
Speaker 1: what they're doing. They're sober when they're doing it, they're
Speaker 1: doing it over a long period, and they're doing it
Speaker 1: for a very clear financial reward. So letting them become
Speaker 1: aware that, you know, if they carry on down this path,
Speaker 1: not only will you lose all the money you've stolen,
Speaker 1: but you know you're facing the prospect of a decade
Speaker 1: in jail may sort of trigger that rational part of
Speaker 1: their brain more than it would in the case of
Speaker 1: the set of a strict driver.
Speaker 2: Thanks for joining us, Matt. That's it for this episode
Speaker 2: of the Front Page. You can read more about today's
Speaker 2: stories and extensive news coverage at enzedherld dot co dot nz.
Speaker 2: The Front Page is produced by Ethan Siles with sound
Speaker 2: engineer Patty Fox. I'm Chelsea Daniels. Subscribe to the Front
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Speaker 2: tune in tomorrow for another look behind the headlines.