Authorised Push Payment frauds are widespread, second only to credit card fraud, and are now recognised as a category of fraud which affects bank account holders. In essence, fraudsters persuade an account holder to authorise payments out of their own account into a destination account, in the UK or abroad. The destination account is controlled by the fraudster and the duped account holder loses their money once it hits that account, thereby becoming the victim of the fraud. In 2019 banks entered a voluntary code to reimburse victims of APP frauds if the destination account is within the UK (the CRM Code).
A judgment handed down on Monday provides a salutary example of an APP fraud. The claimant and her husband fell under the spell of a fraudster referred to in the judgment as JW. In 2018 (before the CRM Code had been adopted), JW and his accomplices persuaded the husband that monies held in his HSBC bank account ought to be transferred to his wife's Barclays account to keep the funds out of the reach of fraudsters they claimed were operating within HSBC. The husband transferred £950,000 to his wife's account. Over the following days, at the direction of JW, payments of £300,000 and £400,000 respectively were then made by the wife, supported by the husband, to two separate accounts in the UAE for alleged safekeeping. JW pretended to be from the National Crime Agency; his accomplice from the FCA. They spun a yarn about conducting a major fraud investigation which the claimant and her husband could assist them with, but first they had to transfer the money to the UAE accounts for safe-keeping whilst investigations continued. The money she transferred, disappeared.
The claimant had been a customer of Barclays for many years, had had a modest income and had not engaged in transactions of this order of magnitude before. The facts are startling. Perhaps the most notable aspect is that JW won over the couple completely. For example, when a uniformed officer attended their address not once, but twice, to warn them that they might be the victims of a fraud they refused to cooperate. They preferred to believe JW, who had warned them the Police might pay them a visit, but that they must not cooperate as it might upset the NCA's investigations.
The claimant sued Barclays for breach of the Quincecare duty on the basis that the bank owed her a duty of care to make inquiries and stop payments out of her account that gave rise to the suspicion of fraud.
The bank made a strike out/reverse summary judgment application. There is a reasonably lengthy consideration by the Judge of the type of evidence that it is permissible to rely upon in cases heard at this stage – the claimant's solicitor had seemingly provided a lengthy witness statement resisting the application which included argument and annexed an expert report for which permission had not been granted. But the main point of interest is the way the Judge dealt with the Quincecare claim.
Leaving aside the contested facts (for example, the extent to which the bank staff had adopted usual procedures, including checking that the customer had not been given instructions by a third party using their Identification & Verification Tool questions), the bank's primary argument was that the customer/claimant herself gave the instructions to pay the money out. The Quincecare duty was not intended to extend to protecting the claimant from her own actions where no suspicious circumstances had preceded the instructions. However, the claimant argued that by 2018 banks were aware of the scourge of APP fraud and this bank should have had a system in place for detecting and preventing the APP fraud perpetrated upon the claimant. The failure to implement such as system was a breach of the Quincecare duty.
The Judge disagreed and granted the bank summary judgment. At the time the money was paid out, the bank did not have reasonable grounds to believe that there was a fraud and so no Quincecare duty to make inquiries and stop payments arose. As the duty did not arise, there could be no breach of duty.
Case Reference: Fiona Lorraine Phillip v Barclays Bank UK PLC [2021] EWHC 10 (Comm)
