HSBC Bank Australia to Reimburse Customer $33,000 After Slow Response to Scammer
HSBC Bank Australia has agreed to reimburse a customer $33,000 following a slow response to a scammer.
Complaint
On February 8th 2021, a third party (scammer) called the complainant claiming to be an employee of HSBC Bank Australia Limited’s fraud team. The complainant says the scammer told her there was fraudulent activity on her account and asked for her assistance to identify the fraud. The complainant was instructed to transfer funds into 9 recipient accounts (mule accounts) held with the complainant’s bank to allow the bank to trace the IP address of an alleged fraud and the scammer said the funds would return within two to three days. It is apparent from the redacted account statements that the 9 mule accounts used to receive the scammed funds were quickly depleted by the scammer.
The complainant transferred a total of $276,678 in 41 transactions (disputed transactions)
over four days. On February 13th 2021, the complaint called HSBC Bank Australia to notify them she may have been scammed. The complainant is seeking reimbursement for the disputed transactions because she believes the bank owed her a duty of care to protect her from fraud. The complainant also says the bank unreasonably delayed recalling the funds. The bank says the complainant authorised all the disputed transactions and is therefore liable for the loss.
Issues and Key Findings
Were the disputed transactions authorised?
The disputed transactions were authorised by the complainant, although because she was misled by the scammer she mistakenly believed that the disputed transactions were to be held in trust by the bank.
Did the bank process the disputed transactions correctly?
HSBC Bank Australia Limited did not make any errors in processing the bulk of the disputed transactions as they were appropriately authorised. However, it is more likely than not that 3 disputed transactions were processed on February 15th 2021, 2 days after the bank was notified of the fraud. It is fair and reasonable that the complainant’s account should have been blocked on February 13th 2021 when she reported the fraud. As a result, the three disputed transactions processed on February 15th 2021 were processed in error by the bank.
Did the bank act promptly and reasonably to recall the funds?
The bank placed blocks on most of the mule accounts promptly on February 15th 2021 which was the next business day, however, the blocks did not stop all account activity and one account was not blocked until February 16th 2021. The mule accounts with redacted statements show transactions performed after February 15th 2021. The bank’s recall process was unreasonable because it did not prevent the withdrawal of funds after February 15th 2021 which would otherwise have been available to be returned to the complainant as part of the recall. The bank should compensate the complainant for the financial loss relating to those transactions.
Why is the outcome fair?
The bank has acted reasonably in processing the bulk of the disputed transactions because the complainant authorised them and is therefore not liable for most of the disputed transactions. However, the bank should have restricted the complainant’s account when it was on notice of the fraud on February 13th 2021. Furthermore, the bank should have acted reasonably when commencing the recall process on February 15th 2021 by ensuring account blocks were placed on all accounts and operated effectively, to prevent the scammer from withdrawing funds that could be made available for a recall.
Determination
This determination was partly in favour of the bank. If the complainant accepts this determination within 30 days, HSBC Bank Australia is to pay the complainant $33,961.45 plus interest.
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