Bank failed to make reasonable efforts to try to recover scammed funds

Common scams targeting bank customers,
A scammer hacked the computer of Ricky’s company and altered the account details on an invoice, resulting in the company sending $US30,000 to an overseas account instead of its usual supplier. The company asked the bank to recall the funds. The bank contacted the overseas bank, which replied that it was awaiting “debit authority” from its customer.
May 2021

Ricky’s bank made a follow-up contact. The overseas bank wrote back asking for an indemnity against the possibility that its customer could claim against it for releasing the funds back to Ricky without authority. Ricky’s bank was unwilling to do this because it thought that the requested indemnity was too broad, i.e. unlimited.

The bank told Ricky’s company it couldn’t help retrieve the money. It failed to mention that the funds were available and could be retrieved, but that the overseas bank wanted an indemnity first.

Over the next four months, the overseas bank contacted Ricky’s bank on several occasions to remind it that it had kept the funds aside and would return them when Ricky’s bank provided the indemnity. Ricky’s bank mentioned none of this to Ricky.

Our investigation

We expect banks to try to retrieve incorrectly sent funds within one business day of receiving notification from a customer. Technically, the bank met this by making contact with the overseas bank by the required deadline. However, we also expect banks to make reasonable efforts to recover wrongly directed funds. Further, the Code of Banking Practice requires banks to communicate clearly and effectively with customers, treat them fairly and reasonably, and deal effectively with concerns and complaints. Ricky’s bank did none of those things.

Its communication with Ricky’s company was inaccurate and incomplete. It said it could do no more to help the company, which was not true. In so doing, it also denied the company the opportunity to contact the overseas bank itself.

The bank also did not make reasonable efforts to try to recover the funds. It could, for example, have worked with the overseas bank to arrive at mutually agreeable wording for an indemnity. It could then have sought a corresponding indemnity from the company.


The bank agreed to reimburse the funds in full, along with $5,000 for inconvenience. The company accepted the offer.

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