Santander has achieved a significant High Court victory in a push payment fraud case concerning its obligation to return £415,000 that was transferred to a fraudulent account.
Between September 13 and October 12, 2016, CCP Graduate School was tricked by fraudsters into authorizing payments totaling £415,909.67 from its account with National Westminster Bank to an account at Santander, which was registered under the name PGW Consultants Limited. The fraudsters directed CCP to identify the account holder as “PGW Limited,” and the payments were processed without considering the recipient’s account name, in line with standard practices at the time.
On October 18, 2022, CCP filed claims against both NatWest and Santander. It alleged that Santander had a duty to exercise reasonable care to prevent its accounts from being used for fraudulent purposes, a duty it claimed was breached when funds from the NatWest account were allowed to be transferred out.
Both banks sought to have the claims against them dismissed and requested reverse summary judgment. While NatWest was cleared of the claims, CCP sought permission to amend its allegations against Santander to include breaches of a “retrieval duty.”
In a ruling favoring Santander, Judge Jennifer Eady stated that “a receiving bank in these circumstances cannot be taken to have assumed any responsibility to the third-party victim of the fraud.” She indicated that Santander’s role as the fraudster’s bank did not create an obligation to protect potential victims of its customer’s actions.
Additionally, the ruling regarding the system of indemnities noted that “the fact that banks are willing to take steps to try to assist victims of fraud does not mean that the courts should find they have a legal obligation to do so.” Eady highlighted that requiring banks to investigate and stop every suspected fraudulent transfer would impose “an unacceptable burden.”
This case follows a similar ruling in a 2023 Supreme Court case against Barclays, which largely dismissed claims regarding banks’ responsibilities in authorized push payment (APP) fraud scenarios.