Elderly woman loses $20k after being duped into risky investment by bank employee

Elderly woman loses $20k after being duped into risky investment by bank employee

https://www.straitstimes.com/business/invest/elderly-woman-loses-20k-after-being-duped-into-risky-investment-by-bank-employee

2023-12-24

Tan Ooi Boon

Invest Editor

The Straits Times

Singapore’s banks generally toe the regulatory line, but as the case of an elderly woman customer duped into a risky investment shows, you always need to be vigilant when your money is involved.

The 75-year-old woman wanted to put $100,000 in a fixed deposit account, but she was served by a dishonest bank employee who misled her into buying a risky investment product that eventually cost her $20,000.

So hell-bent was the bank worker in making a commission from the sale that he lied to the woman, telling her that she would earn regular interest because the product was just like a fixed deposit.

As the customer is illiterate, she was not aware that the employee made fraudulent entries in bank documents to justify the sale and claimed that the woman was a savvy investor.

The misdeed was discovered only a year later when the woman’s daughter found out about the deceit. By then, the value of the investment had plunged by more than 20 per cent.

Both women demanded compensation from the bank but it refused their claim.

They then took their case to the Financial Industry Disputes Resolution Centre (Fidrec), which helps the public resolve disputes with financial institutions here.

The centre’s adjudicator directed the bank to compensate the customer because it found evidence of mis-selling by the employee.

This case, featured in Fidrec’s latest annual report, serves as an important lesson for bank customers on what they should do with their money.

The report did not state if the employee of the unnamed bank was punished for the misdeed, but Fidrec has a practice of referring relevant cases to the Monetary Authority of Singapore (MAS) for further action.

Financial institutions should learn from such examples because mis-selling can harm their customers and severely undermine the institutions’ reputation. After all, the MAS requires all financial institutions to exercise more care when dealing with “selected clients” – those aged 62 or older who are not proficient in spoken or written English or have up to only secondary school education.

Financial institutions must ensure there is a next-level check to verify that their front-line employees have followed sales protocols with such customers before a transaction is processed. This generally includes supervisors calling customers to verify that they know what they are buying.

The following two bank-related disputes from the Fidrec file illustrate the pitfalls that can snare the vulnerable or the unwary.

ST ILLUSTRATION: MANNY FRANCISCO

The $100,000 ‘fixed deposit’

The 75-year-old customer went to her bank because she wanted to put excess cash into a fixed deposit which had been earning rates of between 2 per cent and 4 per cent since 2022.

The customer, who could not read and could speak only Mandarin, told the bank employee that she wanted to open a new deposit account with $100,000.

But instead of processing her request, the employee persuaded her to invest in a unit trust that he claimed was just as safe as a fixed deposit as her money “would be protected” and that she would earn regular interest as well.

The sales pitch convinced her to take up the product. The employee filled in all the forms, which she signed under his instruction as she could not read.

No one in her family knew what she had done until a chance conversation a year later with her daughter who was visiting from overseas. The daughter learnt that her mother had parked money in an investment product after reading the bank statement.

When the mother went to the bank the next day to check the account, she was horrified to discover that she had less than $80,000 in the investment account. She immediately told the bank to cash out and demanded compensation.

The bank rejected her claim as it noted that she had signed all the forms and had also received a follow-up call from the bank after she bought the product. With the help of her family, she turned to Fidrec for help.

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Tips to avoid buying unsuitable investment products

During the adjudication, which took place after a mediation broke down, the judge found that the customer would not have signed the documents if she had been told that the product was not as safe as a fixed deposit because the capital was not guaranteed.

There were many “errors” spotted in the bank documents as well. For example, the form stated that the customer had prior experience investing in unit trusts and life insurance policies when this was not true.

The adjudicator noted that it was impossible for her to know what was written in the documents because she is illiterate. More damning evidence was revealed in the recording of the call from the bank – the customer was “hesitant” in her responses and the bank supervisor could not provide the name of the product in Mandarin.

As the customer was clearly not a sophisticated investor, the adjudicator found that she had been misled into buying an unsuitable product.

As the bank did not ask the employee to attend the hearing to refute the customer’s claim, the adjudicator ruled in favour of the woman and told the bank to compensate her for her losses.

Critical to act on bank alerts

The second case is a cautionary tale for those who respond to online ads by unknown companies without first checking whether the business is genuine or has a physical outlet here.

A woman saw an advertisement on social media that offered a four-hour cleaning session at $20 for first-time customers. She messaged the advertiser and was given a link to download an app on her mobile phone.

She followed instructions in the app and keyed in her credit card information. But an error message saying “invalid card” appeared. Thinking that something was wrong with that card, she keyed in the details of another credit card.

As the error message still appeared, she decided to try again later.

When she checked her phone a few hours later, she was shocked to see several transactions totalling $10,000 charged to her two credit cards. She quickly called the bank and her cards were blocked immediately.

It turned out that the victim’s phone had been hijacked by scammers when she downloaded the app, which contained malware. As a result, the scammers could read messages containing one-time passwords (OTPs) that were sent by the bank for the fraudulent transactions made using her cards.

The victim wanted the bank to file a chargeback request for the merchant to reverse the charges. But the bank said it could not do so as the disputed transactions were approved using OTPs sent to her phone.

She went to Fidrec, which held a mediation. The bank noted that it had sent SMS transaction notifications to her phone but she did not act on them until a few hours later.

In the end, the bank offered to waive 20 per cent of the disputed charges out of goodwill, which she accepted.

The woman acknowledged that she could have averted the scam by not downloading apps from dubious sources and if she had responded to the transaction alerts earlier.

The lesson from these cases is simply this: While banks have a duty to safeguard the interests of their customers, clients should never sign anything without thorough checks, and should keep up to date with the latest advisory on scams.

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