Article published: Monday June 1, 2009
Bank bungle: tip-off vital as checks fail
Westpac was unaware it had mistakenly given a Rotorua account holder access to $NZ10 million until it received an anonymous phone tip. By then more than half the money had been withdrawn from the account and Leo Gao, 29, his girlfriend Kara Hurring, 30, (also know by the last name Yang), and Gao's business partner, Huan Di Zhang, had fled the country.
On Saturday night, Hurring's mother, Suzanne Hurring, was still unsure where her daughter and Gao and the missing millions had gone, as police continue their international search. She declined to comment on the case, saying there were no developments.
Last week Kara Hurring's sister Aroha, who had joined the runaways abroad, returned to Auckland airport, where she was intercepted and questioned by police.
The 22-year-old had charted the group's trip through Hong Kong, Macau and China on her now deactivated Facebook page. Police also revealed that Hurring and Gao were likely to avoid theft charges and instead face charges relating to the access and use of a computer.Police were yesterday finalising a formal assistance request to the Chinese government. News that the error was uncovered because of an anonymous tip-off rather than detection work by the bank itself has startled bank industry insiders.
"Clearly we're dealing with a whole litany of errors rather than one simple mistake," one insider told the Sunday Star-Times. A manager at another trading bank, who asked that her name and bank be withheld, said a mistake of that magnitude would normally be picked up.
"Warning bells get sent, anything that's out of the ordinary, anything in a person's account that's a bit different will get picked up by the Wellington office straight away, probably the next morning." The question remains then how did a simple error with a decimal point go undetected long enough for $NZ6.7m to be transferred out of the account, nearly $NZ4m of it irreversibly? Westpac is saying little but has confirmed the first error was made in early May during the "formalising" of a temporary overdraft facility, with a limit of up to $NZ100,000.
Sources have told the Star-Times a long-serving bank employee processing the debt facility from the bank's offices in Christchurch missed out the decimal point when entering the figure on her computer. In fact, a computer system flag was raised at the bank some time later over the size of the overdraft and a conversation did take place about it between the bank employee and her manager, but in an apparent case of miscommunication the matter was put aside and the error was not corrected.
It is not unusual for Westpac's business customers to transfer large sums of money so the initial transfers made from the account probably went largely unnoticed. While most banks are alerted about transactions on personal accounts involving sums of more than $NZ50,000, large transactions are an everyday occurrence in the corporate world.
In addition, the company name on the bank account, Heights Service Ltd, would have given anyone scrutinising activity on the account no clues the account holders were in fact running a small struggling service station in Rotorua. Gao may have made some cash machine withdrawals, but most banks limit the size and number. Westpac customers have a daily limit of $NZ1500 from an ATM and a daily eftpos card limit of $NZ10,000. Some banks allow unlimited cash withdrawals for face-to-face transactions at a branch, but it is unlikely Gao would have risked it. It is more likely he moved the money around using bank wire transfers. All he would have had to do is instruct the bank to transfer a certain amount of money to nominated bank accounts.
Westpac would have transmitted a message to the nominated banks, using a secure system such as SWIFT or Fedwire. In a peak day, 8.8 million messages are exchanged between banks and financial institutions using this network. A message sent over the SWIFT network would arrive at its destination, authenticated and encrypted, in just a few seconds. The bank handling the transfer needs only the sender's bank account number, the name of the recipient of the funds, the recipient's account number and details of the branch where the account is maintained. The actual transfer is not instantaneous: funds take several hours or even days to move from the sender's account to the receiver's account.
But bank industry insiders say that as the money being transferred was probably "authorised funds" the receiving banks would most likely have cleared the money quickly. It would have then been relatively simple for the funds to then be moved around in a series of fast-paced and seemingly legitimate transactions.
It was only when Westpac became aware the funds in the account were there by the mistake that steps were taken to retrieve money being transferred. Westpac did manage to recall $NZ2.8m of the $NZ6.7m transferred most likely by making an urgent approach to the recipient bank by phone or email but for $NZ3.8m of the mislaid money, it was too late.
Source: www.smh.com.au stuff.co.nz
http://www.smh.com.au/world/bank-bungle-tipoff-vital-as-checks-fail-20090601-bs22.html
The 22-year-old had charted the group's trip through Hong Kong, Macau and China on her now deactivated Facebook page. Police also revealed that Hurring and Gao were likely to avoid theft charges and instead face charges relating to the access and use of a computer.Police were yesterday finalising a formal assistance request to the Chinese government. News that the error was uncovered because of an anonymous tip-off rather than detection work by the bank itself has startled bank industry insiders.
"Clearly we're dealing with a whole litany of errors rather than one simple mistake," one insider told the Sunday Star-Times. A manager at another trading bank, who asked that her name and bank be withheld, said a mistake of that magnitude would normally be picked up.
"Warning bells get sent, anything that's out of the ordinary, anything in a person's account that's a bit different will get picked up by the Wellington office straight away, probably the next morning." The question remains then how did a simple error with a decimal point go undetected long enough for $NZ6.7m to be transferred out of the account, nearly $NZ4m of it irreversibly? Westpac is saying little but has confirmed the first error was made in early May during the "formalising" of a temporary overdraft facility, with a limit of up to $NZ100,000.
Sources have told the Star-Times a long-serving bank employee processing the debt facility from the bank's offices in Christchurch missed out the decimal point when entering the figure on her computer. In fact, a computer system flag was raised at the bank some time later over the size of the overdraft and a conversation did take place about it between the bank employee and her manager, but in an apparent case of miscommunication the matter was put aside and the error was not corrected.
It is not unusual for Westpac's business customers to transfer large sums of money so the initial transfers made from the account probably went largely unnoticed. While most banks are alerted about transactions on personal accounts involving sums of more than $NZ50,000, large transactions are an everyday occurrence in the corporate world.
In addition, the company name on the bank account, Heights Service Ltd, would have given anyone scrutinising activity on the account no clues the account holders were in fact running a small struggling service station in Rotorua. Gao may have made some cash machine withdrawals, but most banks limit the size and number. Westpac customers have a daily limit of $NZ1500 from an ATM and a daily eftpos card limit of $NZ10,000. Some banks allow unlimited cash withdrawals for face-to-face transactions at a branch, but it is unlikely Gao would have risked it. It is more likely he moved the money around using bank wire transfers. All he would have had to do is instruct the bank to transfer a certain amount of money to nominated bank accounts.
Westpac would have transmitted a message to the nominated banks, using a secure system such as SWIFT or Fedwire. In a peak day, 8.8 million messages are exchanged between banks and financial institutions using this network. A message sent over the SWIFT network would arrive at its destination, authenticated and encrypted, in just a few seconds. The bank handling the transfer needs only the sender's bank account number, the name of the recipient of the funds, the recipient's account number and details of the branch where the account is maintained. The actual transfer is not instantaneous: funds take several hours or even days to move from the sender's account to the receiver's account.
But bank industry insiders say that as the money being transferred was probably "authorised funds" the receiving banks would most likely have cleared the money quickly. It would have then been relatively simple for the funds to then be moved around in a series of fast-paced and seemingly legitimate transactions.
It was only when Westpac became aware the funds in the account were there by the mistake that steps were taken to retrieve money being transferred. Westpac did manage to recall $NZ2.8m of the $NZ6.7m transferred most likely by making an urgent approach to the recipient bank by phone or email but for $NZ3.8m of the mislaid money, it was too late.
Source: www.smh.com.au stuff.co.nz
http://www.smh.com.au/world/bank-bungle-tipoff-vital-as-checks-fail-20090601-bs22.html
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