Shared liability decision for APP intercept scam

The unsuspecting director of H contacted Barclays to find out how to amend the payment details and they talked him through the process while he was on the telephone. At this point, Barclays could have asked more about why the change was needed, but didn’t. The payment went ahead to the revised account. A week later, H realised there was a problem and asked Barclays to investigate.

Barclays Bank contacted the receiving bank, HSBC, to ask for a refund of the €100,000, but only around £4 could be recovered, the rest had been lost to the scammers. Given the delays in their investigation, H was offered compensation of £150 by Barclays.

H complained to the Financial Ombudsman Service (FOS), an independent Government-backed body that investigates complaints between financial institutions and their customers. H argued that Barclays didn’t do enough to prevent their money from being lost. They complained that, at no time, did the bank warn them about potential fraud or suggest they should verify the new payment details with the forex company.

Following their investigation, FOS agreed, saying that Barclays could have done more when H called to amend the payee, particularly when they became aware that the money was to be transferred to another payee’s account.

Banks have a responsibility to protect their customers and to help keep their money safe. They have policies in place which allow them to delay or block payments that are out of character, to new payees or for large amounts. More questions can always be asked to ensure that the customer is sure their banking transactions are genuine and that fraud will not be committed.

Unusually for these types of cases, H also complained that the receiving bank HSBC (which held the ‘new’ payee’s account) should also have done more to prevent the fraud from taking place, specifically, they should have queried the receipt of a substantial amount of money, in a foreign currency, into a newly opened account.

After consideration, FOS agreed that HSBC could have done more to prevent H’s losses, stating they:

“must fairly and reasonably [have] been monitoring accounts and any payments made or received to counter various risks including anti-money laundering and preventing fraud and scams”.

This is an important decision, as often the receiving bank bears no responsibility for helping prevent APP fraud, but here the Ombudsman specifically mentioned receiving payments, not just making them.

As an impartial investigator, FOS make their decisions based on what is “fair and reasonable”.

FOS concluded that given the ‘red flags’, both banks should have looked into the transaction in more detail and, had they done so, the payment would not have gone ahead. FOS also said that H should bear none of the responsibility for their losses, as the emails the business received were from the forex company’s genuine email address and there was no hint from what was written in them to suggest they were anything other than genuine.

H was therefore refunded in full (€50,000 from each bank), plus interest at 8%.

Victims of APP fraud can feel embarrassed, wondering how they didn’t realise they were being scammed – this is the same if you are an individual or the director responsible for a large business. It is important to contact the police and your bank to report the crime. You can also report any suspected scamming activity to Action Fraud, the National Fraud and Cyber Crime Reporting Centre. If you have lost money, that may lead to a criminal investigation by the police. If a criminal prosecution is successful, the court can award compensation.

But this is not always possible, particularly if the scammer is overseas or has no assets which can be used to pay compensation. In addition to the Criminal courts, you may have the basis of a complaint and claim against your bank through FOS, as happened in H’s case, if you feel that they did not do enough to look after your money.

Sarah Spruce, head of TLW Solicitors’ Push Payment Fraud Claims team said:

“The specialist fraud team see many FOS decisions and this one is unusual in that the Ombudsman attributes blame equally to both banks – the paying and receiving bank. The warning signs were evident to each and given the measures banks can deploy to prevent fraud, the Ombudsman found that this scam was avoidable.

The case also illustrates that businesses as well as individuals can fall victim to these increasingly sophisticated scams. If you or your business has been the victim of a scam, don’t feel embarrassed. Get in touch with the TLW APP Fraud team and see if there is a possibility to make a complaint to the Financial Ombudsman Service and claim a refund.”