Barclays has emerged victorious in a closely-watched appeal at the United Kingdom's Supreme Court regarding banks' responsibilities to protect their customers from fraud.
The case involved a lawsuit filed against the bank in 2020 by Fiona Philipp, who fell victim to an authorised push payment (APP) fraud and transferred £700,000 ($906,000) to accounts controlled by fraudsters in the United Arab Emirates. Philipp argued that Barclays had a duty to refuse her instructions if they had reasonable grounds to suspect fraud.
In 2021, Barclays successfully had the lawsuit dismissed, but the decision was overturned by the Court of Appeal last year, allowing Philipp's case to proceed towards a trial. However, in a unanimous written ruling on Wednesday, the Supreme Court upheld Barclays' appeal.
Judge George Leggatt stated that the concept of banks owing a contractual duty to customers to refuse payment instructions in cases of suspected fraud is "inconsistent with first principles of banking law." He emphasized that when customers authorize and instruct a bank to make a payment, the bank is obligated to carry out the instruction promptly, without evaluating the wisdom or risks of the customer's payment decisions.
Nevertheless, the Supreme Court allowed Philipp to pursue an alternative case against Barclays. She can argue that the bank breached its duty by failing to take adequate steps to recover the transferred funds in the UAE.
The ruling comes at a time when scams are on the rise, prompting authorities to push for greater involvement of banks in fraud prevention, particularly in relation to APP fraud.
Barclays' victory in the appeal clarifies the legal expectations regarding banks' obligations in cases of suspected fraud. However, the court's decision leaves room for ongoing scrutiny and potential liability if banks fail to take appropriate steps to recover funds lost to fraud.
By fLEXI tEAM