Bank not at fault over invoice scam that left homebuilder $150,000 out of pocket

Home Guides & cases Case notes Fraud & scams - 75227

Bank not at fault over invoice scam that left homebuilder $150,000 out of pocket

Categories:

Fraud & scams,

Summary:

Briar had a loan from the bank to build a house. Briar would forward the builder’s invoices to the bank when they fell due and the bank would release loan funds to her. In August 2021, she received a $150,000 invoice and forwarded it to the bank. A short time later, she received an email purportedly from the building company saying it had a new bank account, and when the bank released the $150,000 to her she paid the funds to the new account.

Published:

July 2022

It was only a week later, when the builder followed up on the “unpaid” invoice, that Briar realised a scammer had sent the email, and that she was the victim of an invoice scam. Briar immediately contacted the bank, which tried without success to recover the money. Briar complained that the bank had failed to protect her from the fraud by not warning her about invoice fraud or checking that the funds were going to the intended recipient.

Our investigation

Briar had initiated the payment to the scammer, and we found the bank had followed her instructions and acted correctly. Banks can not check that an account number and name match when processing a customer’s instructions. Nor are they obliged to otherwise check that the customer does, indeed, want the funds to go to the account number provided. Certainly, banks can issue warnings to customers about the risk of invoice scams, but they are not required to do so.