Bank partly responsible for international payments to fraudster

Categories:
Common scams targeting bank customers
Summary:
Harper began corresponding with a person online and this relationship had features of a romance scam. Harper instructed the bank to send a payment overseas but then changed her mind and cancelled it. The bank made a note about the possibility of a scam. Following further online discussions, Harper made four international transactions totalling $50,000. Some of the money came from a mortgage top-up she requested to buy a new car. Harper said the bank did not question her about the transactions. She felt the bank had a responsibility to do more to detect the fraud.

Our investigation

We concluded the bank had failed to act with reasonable care and skill in processing three of the four transactions. We found no evidence that the bank asked Harper about the nature and purpose of the transactions, thereby losing the opportunity to identify potential “red flags”, that is, indications of a possible scam. It also failed to act on two clear red flags – the note about a possible scam when Harper cancelled an overseas payment, and the fact Harper drew down and sent overseas loan proceeds intended for use to buy a car. The bank should have questioned Harper or warned her about the possibility of fraud, which might have dissuaded her from making the payments.

We considered what might have happened if the bank had acted with reasonable care and skill. We concluded that either of two possible outcomes – that she proceeded with the transactions despite a warning, or that she had second thoughts and sought guidance from her family – were equally credible. We recommended she and the bank share equally the losses from three of the four transactions. We also noted several service failings, including delays in looking into Harper’s complaint, and considered these created unnecessary stress that warranted compensation.

We recommended the bank pay Harper $20,000 towards her direct financial losses and $5,000 for stress and inconvenience. We also recommended the bank should give staff more training and consider how to note risk factors on a customer’s profile.

Outcome

Harper accepted the offer.

Print this page