More and more, we are hearing terrible stories of predatory and sophisticated scams targeting Australians. All scams are different and sometimes scammers hack or get unauthorised access to your money. In other cases, scammers use a variety of compelling techniques to convince you to transfer your hard-earned money to them. In this blog, we look at what options you have to recover lost monies to scammers and/or compensation from the financial institution.
Financial scams can be very complex and very manipulative. People of all age groups and backgrounds, not just the vulnerable and elderly, are being targeted by scammers as billions of dollars (yes, billions) are lost each year. Whether you knowingly or unwittingly provided funds to a scammer, there may be avenues to recover the lost funds or to seek compensation for your losses.
What action can be taken to recover your losses if you are scammed?
Aside from taking actions to protect your identity, including changing passwords etc., it may also be possible to bring legal action against your bank or other financial institution to recover the lost money.
There is a growing body of legal authority supporting that banks have a role to play in preventing scam activities by monitoring customer accounts and detecting suspicious transactions to prevent money from being transferred to scammers. These obligations can be imposed on banks even if the transactions in question are voluntary (ie. at the customer’s request).
What does the law say about a bank’s responsibility to prevent scams?
The legal authority is still developing in Australia; however, if we look overseas for guidance, we find authority in the UK that supports the obligation on banks to act to prevent customer transactions to scammers. This authority (and other factors) has led to a voluntary code of conduct covering most banks. This code of conduct addresses scamming in certain circumstances, and in some cases, banks have agreed (or been ordered) to refund all money lost to scammers.
In terms of judicial authority, as far back as 1989, there is UK authority (in the case of Lipkin Gorman v Karpnale Ltd [1989} 1 WLR 1340 at 1378) which found that:
“a reasonable and honest banker [who] knew of the relevant facts…would have considered that there was a serious or real possibility, albeit not amounting to a probability, that its customer might be being defrauded.”
This authority has some effect in Australia and also has been the basis of decisions in favour of victims of fraud at the Australian Financial Complaints Authority (AFCA).
In one such AFCA decision, a banking customer had withdrawn and transferred approximately $370,000 to overseas third-party bank accounts. The AFCA determination found that the bank was responsible for some of the customer’s losses because it ought to have been aware of the fraudulent nature of the transactions. Altogether, the customer was refunded around $300,000. This decision was arrived at by AFCA because:
“Although the bank acted on the complainant’s instructions, the transfers were significantly out of the ordinary for the complainant and it should have made further enquiries following the initial failure of the third transfer.”
Therefore, even where a customer has voluntarily transferred and lost money to a scam, it may still be possible to seek compensation from the bank for those losses if the nature of the voluntary transactions was suspicious and the bank ought to have been on notice that the transactions were in response to fraudulent activity (and stopped them).
More needs to be done in Australia to prevent fraud
Whilst it is encouraging that overseas Courts have recognised the obligations of banks to act and prevent fraud and also that those obligations are being recognised here in Australia, more needs to be done to prevent fraudulent activity, not just by banks but also by telecommunication companies and social media platforms.
Specifically, we would like to see commitments from our banks to take responsibility for fraud where the circumstances are suspicious, and customers were vulnerable to a scammer. In the meantime, we have complaint options at AFCA and in Court in response to losses due to fraudulent activity.
Get help to recover your losses from a scam
If you have been a victim of a scam, we can give you some free advice about possible claims against your bank or other financial service provider to recover and/or seek compensation for your losses.
Contacting Berrill & Watson
📞 Melbourne: 03 9448 8048
📞 Brisbane: 07 3013 4300
📞 Anywhere else in Australia: 03 9448 8048
How we charge
We are Australia's best value superannuation/insurance law firm. Other law firms charge nearly double (& sometimes more than double) what we charge. So, if you get a quote from them, or have a cost agreement, ask us what we will charge you.