Bank’s suspicions of fraud sufficient to justify reversing payments

Common scams targeting bank customers,
In May 2023, Nolan, a cryptocurrency trader, opened an account with a bank, and deposits totalling $110,000 were put into the account within 10 days of its opening. After each deposit, he immediately transferred the funds to someone else. The bank became concerned about how he was operating the account and froze it. The bank asked him about the nature and purpose of his banking activities, and he answered that he was a cryptocurrency trader, and the outward payments were to his partner. When the bank asked why the deposits all contained the reference “travel”, he said the sender of the funds had entered it.
April 2024

When the bank pointed out that several payments from different payees had the same reference, he replied that he had told them to enter it. Another bank subsequently told his bank that two of its customers were seeking the recall the funds sent to Nolan’s account. It said the individuals had been tricked into transferring the funds and were victims of scams. The bank agreed and reversed the $30,000 remaining in Nolan’s account. Nolan complained that the bank should not have reversed the payment because he had not defrauded the senders of the funds, and the bank’s actions had caused him a financial loss. The bank pointed out that its terms and conditions allowed it to reverse a payment if it reasonably considered the payment was fraudulent.

Our investigation

The bank had the power under its terms and conditions to reverse the payment. Payments made in the course of a scam are obtained by deceit, which is a type of fraud. The notification from the other bank, together with Nolan’s unsatisfactory explanation for why money was coming and leaving his account, amounted to a reasonable basis for the bank’s belief. We accepted that Nolan may not have been acting fraudulently, but the payments were the result of fraud. However, banks must also follow a fair process when reversing payments. The bank had not notified Nolan of the other bank’s claim, nor given him the opportunity to provide information about the transactions in question before it reversed them. Even so, we did not consider this failing caused Nolan a financial loss because the bank would have made the same decision even if it had asked Nolan about the payments.


We did not uphold Nolan’s complaint.

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