Beware of the fraudsters – banks hold no duty of care unless they are put on enquiry

The recent High Court decision in the case of Fiona Lorraine Philipp v Barclays Bank UK PLC highlights the danger to individuals who fall victim of an authorised push payment fraud leaving them vulnerable to significant financial loss. There are some simple steps you can take to ensure you don’t become a victim of authorised push payment fraud.

What is an authorised push payment?

This occurs when money is knowingly transferred from a person’s bank account to the account of a fraudster. A common example is where a fraudster intercepts an email between a supplier and customer which contains a legitimate invoice but varies the account details so that payment is made into the account of the fraudster as opposed to the anticipated supplier.

What protection is there for victims of authorised push payment fraud?

Bank customers were previously provided some protection after the case of Barclays Bank PLC v Quincecare Limited. It was held that a banker must refrain from executing an order authorised by one of its customers if they have reasonable grounds for believing that the order is an attempt to misappropriate the customer’s funds (the Quincecare Duty).  Further checks should be carried out by the bank to ensure that the customer is paying a legitimate source.

Quincecare Duty in the case of Fiona Lorraine Philipp v Barclays Bank UK PLC

The extent of how far the Quincecare Duty applies was recently considered when Mrs and Dr Philipp fell victim of an authorised push payment. They authorised the transfer of £700,000 in two separate tranches from Mrs Philipp’s account with Barclays to international bank accounts. On each occasion, Mrs Philipp confirmed to Barclays more than once that she wished for the transactions to proceed.

Once they realised it was a fraudulent transaction, Mrs Philipp brought a claim against Barclays to recover damages. She argued that the Quincecare Duty required Barclays to have certain policies and procedures in place to detect, prevent and stop its customers from falling victim to authorised push payments. Mrs Philipp also argued that if the transfer had been delayed, she could have recovered the monies before they reached the hands of the fraudster.

The High Court held that the bank did not owe Mrs Philipp a duty of care. It found that the claim amounted to an invitation to the court to extend the scope of the Quincecare Duty beyond its established boundaries limiting the duty to cases which involved an agent of the customer.

What should I do to avoid being a victim of fraud?

This case is further warning to take extreme caution when making payment when it is not entirely clear where the payment instruction has come from. Here are some simple steps you can take:

• If payment details are provided by email, it is always worth making a call to ensure that the email has not been intercepted by a fraudster and that the account details are genuine.
• If you find yourself a victim of authorised push payments, you should contact your bank immediately to see if a stop can be placed on the payment.
• If your bank can’t stop the payment, you should contact the recipient bank in the hope that the funds can be ringfenced while an investigation can be carried out.
• If you have been a victim of authorised push payment fraud, it’s important to get professional legal advice as soon as possible.