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.

Outcome

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