Bank reimbursed quarter of customer’s scam loss

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Bank reimbursed quarter of customer’s scam loss

Categories:

Fraud & scams,

Summary:

Addison received a call from someone saying he was from her bank's fraud team. The caller’s number matched the bank's number. The caller told Addison someone was trying to gain access to her accounts, and she needed to move her money to a new "safe account". Addison did as she was told, transferring $21,000 in three payments via internet banking to another account with the same bank. The call was disconnected, and when she rang the bank, it told her it did not have an employee by that name. Addison realised she had been scammed.

The bank tried to recover the money but was able to stop only the third payment of $2,300. Addison asked the bank to reimburse her for her loss, but it declined, saying she had authorised the payments. It did, however, offer to reimburse 25 per cent of her loss, or $4,675, as a goodwill gesture. Addison declined the offer and asked us to investigate.

Published:

September 2024

Our investigation

A bank has a duty to follow a customer’s transaction instructions. However, in carrying out the customer’s instructions, a bank must act with reasonable care and skill and in accordance with good banking practice.

If a bank detects (or ought to have detected) warning signs of a real possibility that a customer is being scammed or defrauded (so-called red flags), good banking practice requires that it make inquiries about the transaction and, where warranted, warn the customer about the possibility of a scam before processing the transaction.

In the absence of such warning signs, however, the customer, not the bank, is responsible for checking that the money is going to the intended recipient and that the recipient is legitimate.

We concluded the bank was not on notice of any “red flags” and had acted on Addison’s instructions to make the payments We also examined whether the bank had taken reasonable steps to recover the funds once Addison explained what had happened, and we were satisfied it had frozen the accounts that received Addison's money within 15 minutes of her calling the bank.