IMPORTANT SUPREME COURT DECISION REGARDING BANKS’ LIABILITY FOR FRAUDULENT PAYMENTS
When a customer of a bank is a victim of an authorised push payment (APP) fraud, they have been deceived by a fraudster to instruct their bank to transfer money from their account to an account controlled by the fraudster. The latest figures from UK finance show that in 2022, there were around 207,000 reported APP fraud cases and losses of over £485m. The growth of this type of fraud has been exponential and it shows no signs of abating.
Given the rise in APP fraud, a legal question for the courts has been the extent to which banks should be liable to their own customer for processing such payments.
The courts have long recognised a duty on banks to refrain from acting on a payment instruction if, and for as long as the bank is put on inquiry by having reasonable grounds for believing that the instruction is an attempt to misappropriate the funds of the customer. This has been named the ‘Quincecare duty’, a label taken from one of the cases in which the duty was relied on.
However, in recent years the courts have been grappling with how far this duty extends and whether it should apply at all where the customer has authorised the payment, even if unwittingly authorising payment to a fraudster.
Oct-Dec 2023 issue
CMS Cameron McKenna Nabarro Olswang LLP