Barclays wins UK Supreme Court case over payment fraud

[ad_1]

LONDON (Reuters) – Barclays Bank (Barclays) on Wednesday won an appeal to the UK’s High Court over the extent of banks’ duties to protect customers from fraudsters, in a closely watched decision that lawyers say could stem a torrent of lawsuits. .

Fiona Phillip, a music teacher and longtime client, sued the bank in 2020 after being tricked into transferring £700,000 ($906,000) to accounts in the United Arab Emirates in a so-called approved instant payment (APP). scam.

Payment systems watchdog (PSR) has said such scams have become the biggest type of payment fraud in Britain and cost customers £583m ($752m) in 2021, up 39% on 2020 – and authorities are seeking to make banks pivot. in preventing fraud.

Phillip alleged that Barclays owed it a duty to ignore her instructions if the bank had reasonable grounds to suspect that she had been defrauded.

But in a unanimous ruling that the lawyers said would be “extremely beneficial” to the financial industry, Supreme Court Justice George Leggatt said this would be “inconsistent with first principles of banking law” as he overturned the 2021 appeals court ruling that allowed the case to proceed to trial.

“When the customer authorizes the bank and pays his instructions, the bank must immediately implement the instructions,” he said. “A bank has no concern for the wisdom or risk of its customers’ payment decisions.”

The court acknowledged that such frauds caused great suffering to the victims, but said it was ultimately up to Parliament to consider who bears the losses, noting that the new Financial Services and Markets Act provides for a compulsory payment scheme in some cases of domestic fraud.

The proposed scheme will not cover external payments.

Barclays said it welcomed the decision, which provides “certainty and clarity” on an important legal issue.

James Levy, a partner at law firm Ashurst, said the onus was on clients to ensure payment instructions were bona fide.

“It closes the great risk of what would otherwise not have been a deluge of lawsuits against banks in the country by customers who have been victims of APP fraud,” he said.

However, the Supreme Court allowed Phillip to pursue an alternative case against Barclays on the grounds that the bank had breached its duty by not taking appropriate steps to recover funds transferred to the UAE.

(Cover) By Sam Tobin and Kirsten Ridley, Editing by Louise Heavens, Barbara Lewis and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

[ad_2]