Authorised vs Unauthorised Transactions:
FOS Awards Revolut Customer Partial Compensation After Fraud

When investigating fraud and scams related to bank accounts, there are two main types of transactions:

• Authorised – where the bank account holder has given permission for funds to be moved (or has moved them themselves) as a result of coercion or persuasion by a scammer.
• Unauthorised – where the bank account holder has not given approval or moved funds personally, and this has been done by a scammer or fraudster who has gained access to the victim’s account details, such as PIN, one-time passcodes (OTPs) or other security information.

Generally, responsibility for any losses as a result of any authorised transactions falls on the bank account holder; however, where banks have been found not to have sufficiently protected their customers from Authorised Push Payment (APP) fraud, then there may be other avenues for compensation open to the scam victim.

Unauthorised transaction fraud happens when fraudsters persuade victims to divulge private information about their bank or financial services accounts, which is then used to access the victims’ accounts to move money.

After getting access to the victim’s bank accounts or credit cards, the scammer will begin to make payments or apply for loans or bank cards in the victim’s name – it’s only then that the account holder realises they have been the victim of fraud.

Unless the bank can prove that their customer has been severely careless through not properly handling their security information – known as gross negligence – funds are usually returned immediately by the bank.

However, when banks do refuse to refund losses due to gross negligence, customers can take their complaint to the Financial Ombudsman Service (FOS) for an independent investigation.

Revolut customer Mr M made a complaint to FOS after being refused compensation following an investment scam totalling £47,489. As part of the scam, five payments were made from Mr M’s Revolut bank account to a Binance account set up in his name. Binance is an online exchange where users can trade cryptocurrencies. The scammers also gained access to one of Mr M’s devices using remote access software in order to be able to manage the transactions between his Revolut account and the newly opened Binance account.

Mr M claimed that he only authorised the first two of the five payments to the Binance account, and the others were made without his approval; the scammers also applied for a £25,000 loan with another bank using Mr M’s details, which was subsequently written off.

Revolut argued that, as Mr M had allowed the scammers to access his devices, he had willingly given them the means to make all disputed transactions on his behalf, even without providing explicit authorisation.

The FOS investigation agreed with Revolut that all five transactions ‘could be fairly classed as authorised’ but that Revolut should reasonably have had concerns after the third of five payments. The Ombudsman found that ‘an intervention [from Revolut after the third transaction] would’ve likely prevented further losses’ but that Mr M was partly to blame for the losses as he had given sufficient authorisation to the fraudsters to make transactions on his account and so 50% of the liability was apportioned to both parties.

Of the total £47,489 loss, £25,000 had been facilitated by the bank loan, which had since been written off, leaving the remaining loss for Mr M to recover at £22,489. Revolut had already paid £2,000 to Mr M as a gesture of goodwill and was instructed by FOS to pay the remaining 50% to Mr M (£9,244.50) plus 8% interest.

Sarah Spruce, Head of TLW Solicitors’ Professional Negligence team, commented:

This is a really interesting case, and highlights the sometimes-murky distinction between authorised and unauthorised payments and where liability lies for recovering losses.

Although Mr M argued that the disputed transactions had not been authorised due to his previous actions and behaviour, FOS took the view that he had sufficient knowledge of the ‘unauthorised’ transfers for them to be considered ‘authorised’.

As this case shows, FOS investigations can be very complex, so it is vital to have advice from a team of specialists who understand the cases and counter-arguments put forward by banks; get in touch with my team if you need help! We can go through all of the options and advise whether you have the basis of a ‘no win, no fee’ claim.