Bank declined to reimburse scam loss because customer authorised the payment

Categories:

Fraud & scams, Service problems, Bank accounts, Bank decisions,

Summary:

In January 2024, Millie received a call from someone who said he was from the bank's fraud team. The number he was calling from matched the bank's telephone number. He told Millie someone was attempting to access her accounts, and that she needed to move her money to a "safe account" in her name. Millie did so, transferring $34,000 in two payments via internet banking to another account with the same bank. One of the payments triggered the bank’s fraud detection system. The bank tried to ring Millie, but she was on the phone and so the bank left a message and blocked the accounts that had received the money. Millie later became suspicious and rang the bank, which told her she had been scammed.

Published:

July 2025

The bank tried to recover the money, but it had been transferred out almost immediately. The bank subsequently advised that $2,000 had been left behind when it called Millie, and that it also managed to recover $12,500. Millie asked the bank to reimburse her for her loss, but it declined, saying she had authorised the payments. It offered to reimburse a quarter of the amount lost – $4,875 – as a goodwill gesture. Millie declined the offer and asked us to investigate.

Our investigation

A bank’s primary duty is to act on valid payment instructions from a customer. However, if there is a possible warning sign, or “red flag”, the bank is obliged to make inquiries, and, if warranted, warn a customer about the possibility of a scam. We considered the bank had met its obligation to act on warning signs of fraud when it tried to call Millie about the transactions and stopped the accounts that had received her money.

We also looked at whether the bank had taken timely steps to recover the money and were satisfied it had done so. The bank froze the accounts as soon as it suspected she had been scammed and took steps to recover her funds straightaway.