City of Kalgoorlie-Boulder loses thousands of dollars to online scammers


Online fraudsters allegedly diverted $170,000 from the City of Kalgoorlie Boulder after the council fell for what is known a ‘man in the middle’ scam.

Early this year the city paid $170,000 for works done by a contractor, however the money never made it into the contractor’s bank account.

According to the city’s CEO John Walker, the contractor’s system was hacked and scammers were able to construct fake emails and invoices to trick the city into paying money into the wrong bank account.

It was only when the contractor asked where their payment was, that alarm bells sounded.

City of Kalgoorlie-Boulder CEO John Walker says the incident is a wake up call for all businesses.(ABC Goldfields-Esperance: Nathan Morris)

Western Australia Police would not comment on the details of the incident, but confirmed they are investigating a possible fraud.

The contractor involved also declined to comment.

Who should pay?

The council is still working to reclaim the lost money, and Mr Walker said he expected at least half of the $170,000 to be covered by insurance.

“We would argue that they are liable — it was their system that was breached, not ours, their information which was extracted, [it] was their instructions — but we’re really in it together,” he said.

After the scam was discovered, the city paid the contractor the $170,000 it was owed, but Mr Walker said discussions with the contractor are ongoing.

‘A wake up call’

Mr Walker said the council had reviewed its processes and found one area it needed to improve.

The scam could have been avoided if the council had verified the request to change the contractor’s bank account details in person, rather than via email.

“That’s a good lesson that is now part of our system,” Mr Walker said.

He said the incident served as a warning for all businesses.

Consumer Protection’s Catherine Scott said this redirection scam, known as the ‘man in the middle scam’, where someone pretends to be a legitimate company to get payments diverted, is becoming increasingly common.

“In 2019, 26 West Australians were duped out of $1.5 million through payment redirection scams,” Ms Scott said.



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