Payment order at the counter of a bank in favour of the account of a fraudster at a bank abroad

Topic: Abuse and fraud Case number: 2024/08

The client was at an advanced age and found advertising on the internet for supposedly lucrative investments. After he expressed interest in them, he was contacted by a so-called advisor and decided to invest EUR 20,000. The necessary information was provided to him by e-mail. He then went personally to the bank counter and gave the payment order. He was made aware of the withdrawal limits for his savings account by the counter employee, and it was recommended that he split the order into two payments of EUR 10,000 each. A portion of over EUR 10,000 was immediately transferred. The second partial amount was to be transferred at a later date. After the first transaction, the client told his children about the investment made over the weekend. They immediately suspected that their father had been the victim of fraudsters. The following day, the client cancelled the payment that had not yet been executed and asked the bank to recall the partial amount of EUR 10,000 that had already been transferred. Unfortunately, the recall was unsuccessful. The client’s children demanded that the bank share 50% of the loss of EUR 10,000 incurred because, in their view, the counter employee should have noticed the fraud and warned the client. The bank rejected the claim and took the view that it had duly fulfilled the client’s instruction, whereupon the client’s children submitted the case to the Ombudsman. In the Ombudsman proceedings, the bank, represented by a lawyer, maintained its position without compromise. The Ombudsman had to close the case without mediation.

The 89-year-old client had responded to an advertisement on the internet which promised very lucrative investments abroad. After exchanging emails with a supposed professional advisor, the client decided to make an investment of EUR 20,000. He went to the bank counter personally and asked the counter employee to arrange for a transfer of EUR 20,000 to be debited from his savings account to the account whose details had been provided to him by the “advisor”. According to his statement, he showed the counter employee the e-mail with the details of the transfer and the IBAN of the recipient’s account at a foreign bank. The counter employee then made the client aware of the withdrawal limit for the savings account and suggested that the amount of EUR 20,000 be split into two amounts of EUR 10,000 each, with one portion of EUR 10,000 to be paid out immediately and the second portion of the same amount to be paid out from the savings account at the start of the next month, after complying with the notice period. The division allowed the client to avoid the non-cancellation fee.

On the weekend following the first transaction, the client discussed the investment and the associated payments with his children. His children recognised in the circumstances of the transaction indications of fraud and convinced their father that he had been the victim of fraud. On the following Monday, the client went back to the bank counter. He requested the cancellation of the transfer still pending and the reimbursement of the payment already executed. The bank’s efforts to recover the amount from the recipient bank were unsuccessful. The suspicion of fraud was confirmed since the money disappeared. Represented by his children, the client claimed a loss of EUR 10,000 from the bank. He felt that this was at least partly attributable to the bank’s misconduct. His children immediately recognised the fraud based on his description of events. In her view, the counter employee should also have noticed that her father was the victim of fraud and should have warned him accordingly.

In a complaint to the bank’s management, the client’s children accused the bank of not having recognised the fraud and not having enquired about the motives behind the payment order from their father. In their opinion, several factors should have warned the bank: the age of their father, the fact that he had not made any transfers abroad in the last few decades, the fact that he did not usually use his assets for investments, and the fact that the payment order involved a very high amount for him, which was more than one third of the balance in his savings account. Had the bank requested additional information about the reasons for the payment or warned the client about the risk of fraud, the client would certainly have refrained from making the transfer and would not have incurred any loss. The children therefore asked the bank to pay their father compensation of at least half the loss he had incurred, i.e. at least EUR 5,000.

The bank claimed that it had merely executed a payment instruction for the client. As an agent, it was required to ensure that the principal was authorised to issue the order and thereafter to execute the order issued in accordance with the instructions and in a timely manner. The bank was not obliged to check the recipients indicated by its clients or the circumstances surrounding a payment order on the basis of certain criteria. The bank pointed out that it is the client’s responsibility to carefully check the business partners to whom he wishes to make a payment. Based on these principles, the bank refused to consider the possibility of compensation for the client. The client and his children did not share the bank’s opinion and referred the case to the Ombudsman. In their mediation request, they essentially argued that the bank’s statement did not take into account the particularities of the case.

After analysing the information provided by the client and her children, the Ombudsman contacted the Bank. He informed her that he generally shared the bank’s arguments which it had set out in its statement to the client and his children. The Ombudsman pointed out, however, that there could be individual cases in which it was appropriate for a bank to provide the client with additional warnings based on its duty of care and loyalty in the context of an agency relationship. This, however, presupposes that they ask the client about the background to his instructions and alert him to the risk that he could become a victim of fraud if there are any corresponding indications.

In the present case, the e-mail with the payment instructions that the client submitted at the bank counter also contained a link to install a well-known program over which third parties could have accessed the client’s computer. In the Ombudsman’s view, the existence of such a link in the e-mail – if noticed by the bank – could have been a clear indication that the bank should have warned the client about the risks of advanced age. Experience shows that criminals use such programs in combination with other information obtained from their victims to gain control over the victims’ computers and thus obtain access to their bank details. In light of these considerations, the Ombudsman asked the bank to reconsider its position.

In his response to the Ombudsman, the lawyer appointed by the bank for the Ombudsman proceedings essentially confirmed the client’s original position. It denied any responsibility for the incident and confirmed its refusal to pay the client any compensation. With regard to the course of events at the counter, the bank stated that, according to the description given by its employee, the client had not shown the bank the entire email that the fraudsters had sent him, but only the part with the details of the recipient’s account. In the bank’s opinion, the suspicious link was therefore not visible. The other information provided by the client did not indicate that he was in fact the victim of an investment fraud.

Given that the bank was vigorously defending its version of events and it was impossible to clarify exactly what had happened at the counter, and since the bank consistently refused to accommodate the client’s request, the Ombudsman ended his mediation efforts.

In his final letter to the client, the Ombudsman expressed his regret about the damage the fraudsters had inflicted on the client. He also explained that, as an intermediary, he had to respect the credibility of the parties and did not have the authority or resources to conduct extensive investigations or gather evidence. For this reason, he was unable to question any witnesses in an attempt to determine the exact circumstances under which the client had given the payment instruction to the bank and how the bank’s employee had received it. Furthermore, in the Ombudsman’s view, the duties explained by the bank in connection with the execution of payment orders corresponded to the legal opinion prevailing in Switzerland.