Bank under no obligation to check company’s legitimacy before processing transaction

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Bank under no obligation to check company’s legitimacy before processing transaction

Categories:

Common scams targeting bank customers,

Summary:

In 2021, Hemi authorised payments totalling $149,000 to a company presenting itself as a cryptocurrency investment business. The bank called Hemi before making the first payment to check it was he who had authorised the payment and to ask about transaction details. The bank also asked Hemi whether he had done research on the company, and warned it would not be able to recover any losses from the investment. Hemi told the bank he understood what he was doing and wanted to proceed with the transaction.

Published:

May 2022

As it turned out, Hemi lost all $149,000, and he considered the bank should have done more to monitor his account and check the legitimacy of the company.

Our investigation

We told Hemi banks were under no general obligation to monitor customers’ account transactions to prevent them from making unwise decisions, and that it was a customer’s responsibility to check before making payments. In any event, the bank had, in fact, called Hemi to check on the first payment, even though it was under no obligation to do so.