Bank could have recovered funds with swifter action

Common scams targeting bank customers,
Jane received a call from a person pretending to be from her internet service provider who offered to help fix problems with her computer. Jane allowed the caller remote access to her computer and followed his instruction to log into her internet banking. While there, he covertly made three transfers from her accounts of $5,900, $9,500 and then $4,700. To authorise the transactions, Jane’s bank sent her unique codes to enter into her internet banking. Jane received the codes on her mobile phone and gave them to the caller. The first two transfers went through that afternoon, a Friday, but the third of $4,700 just missed the cut-off for processing and was scheduled to go on Monday morning. On Friday evening, Jane realised she had been scammed and alerted her bank.
January 2020

On Saturday, the bank receiving the first transaction of $5,900 told Jane’s bank the transaction couldn’t be processed because the recipient’s details weren’t correct. The payment was returned to Jane’s account. On Monday morning, the third transaction of $4,700 was processed and the money was sent to an overseas account. On Tuesday afternoon, the bank contacted the banks that had received the second and third transactions, but by then the money had been withdrawn.

Jane asked her bank to reimburse her loss, but it declined, saying she had given the caller the codes – an explicit breach of the terms and conditions of her account.

Our investigation

We agreed that Jane had breached the terms and conditions, and this had directly contributed to her loss. She was not, therefore, entitled to reimbursement on that score. However, the bank’s apparent delay in acting on Jane’s Friday evening phone call appeared to have resulted in a needless loss of funds. We asked the bank why it did not cancel the third transaction and contact the recipient banks sooner than Tuesday afternoon. It said the team responsible for cancelling the payment didn’t work outside business days and the third transaction was processed before they saw the fraud notification on Monday morning. The bank thought the time taken to initiate the recovery of the funds was acceptable.

We asked other banks what their practice was in such situations. They said their teams responsible for recovering funds worked standard business hours, that is, not evenings or weekends, and would usually start recovery action within one business day of notification from a customer (which was standard practice at the time and may no longer be current). Jane’s bank should therefore have started recovery action on Monday, not Tuesday afternoon. We were not able to determine whether starting the recovery action earlier would have enabled the bank to recover the funds, as the recipient banks would not tell us when the funds left the scammer’s accounts. However, we concluded that the $9,500 transferred on the Friday afternoon was probably already withdrawn by Monday, so the delay probably made no difference. However, the Monday morning transfer of $4,700 could have been reversed in time, so we recommended the bank compensate Jane a total of $6,000 for the value of this transfer and for inconvenience arising from the second transfer.


Jane accepted the offer.

Print this page