Bank had no reason to suspect transfers were a scam

Common scams targeting bank customers,
Sam was the victim of an online scam. He received a message from an acquaintance via a social media platform telling him he had won a prize and needed to put $7,500 into a New Zealand bank account to claim the prize, which he did. The acquaintance then told him he also needed to transfer $30,000 to an American bank account. Sam asked his bank how to make such a payment, and the bank told him. Sam then transferred the funds to the American account. This transfer was unsuccessful because of a problem with the recipient’s account and the funds were returned to Sam. He then instructed the bank to send the money to another American account in a different person’s name.
January 2020

Not long afterwards, Sam realised he had been scammed. His bank tried to recover the funds from the American bank, but it was too late – the money was already gone. Sam asked his bank to reimburse him, but his bank declined because it did not consider it was responsible for his loss. It did, however, offer him $1,000 in recognition of delays in investigating his concerns.

Our investigation

We told Sam he had made the transactions himself, and there was no obligation on the bank to reimburse him. We could find the bank liable only if there were grounds to suspect fraud (“red flags”) and it had failed to act on those suspicions. Sam said the bank should have known he was being defrauded because the first international transfer failed, but this appeared to be due to a technical problem. We didn’t think this would have alerted a reasonable banker to the fraud. Sam also thought the bank should be liable because its security systems had not prevented his loss. We considered the bank had met its legal obligations to gather the required information to process the transaction. It was Sam’s responsibility, not the bank’s, to ensure the legitimacy of the person to whom he was sending funds.


We did not uphold Sam’s complaint and recommended he accept the bank’s offer, which he did.

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