Online bank fraud – When is the Bank Responsible?

Banks can protect their own systems and they can introduce the toughest of security measures for their customers. But they cannot be held responsible if customers are tricked into giving away their passcodes and in any way co-operating with the fraudster. This is like saying you can leave your wallet on the train and the bank will compensate you for your losses.

In the UK there has recently been a scam whereby a fraudster claiming to be from the phone company calls up and persuades a customer to type in their bank security codes. There then follows the predictable argument about who is responsible for the subsequent losses – the bank or the customer.

One UK businesswoman is claiming that as the bank did not alert her to unusual activity on her account it bears responsibility and should refund her.

These scams are sophisticated and easy to fall for. The resulting losses are much more serious than leaving a wallet on the train. Sympathy for the victim is natural. But clearly if the bank compensated every customer who fell for this kind of scam its losses would be huge.

What banks should do is make it clear under what circumstances the bank is liable and under what circumstances the customer is liable. Most bank websites contain lots of advice about how to avoid scams but they do not address this sensitive issue – unless it is buried in the terms and conditions which nobody reads anyway. They need to be more upfront about it as a way of alerting customers to the potential risks. –  Online Fraud Detection.