Can a Customer Claim Against the Bank for an Authorised Push Payment Fraud?

Authorised push payment fraud, wherein technologically savvy fraudsters impersonate legitimate payees and/or manipulate parties into making real-time payments to the fraudster’s bank account, is on the rise. In these circumstances, the question of a bank’s duty of care comes to the fore. Do banks owe a duty of care to its customers when executing customers’ instructions and, if so, what is the extent of such duty? This article aims to be a primer on these issues while offering commercial and legal perspectives on such issues.

Introduction to Authorised Push Payment Fraud

In tandem with the rise of digital payment services, technologically savvy fraudsters are finding ways to impersonate legitimate payees and/or manipulate parties into making real-time payments to the fraudster’s bank account.

Such fraud, also known as authorised push payments fraud (“APP Fraud”), is becoming more and more prevalent. Victims of APP Fraud would have instructed their bank to pay a party who appears to be a legitimate payee, but would have in fact been tricked into paying the fraudster’s account.
In certain instances, to recover the misappropriated funds, the victim of APP Fraud can quickly apply to the Court for freezing orders to ensure that the funds wrongfully procured by the fraudster are not dissipated. The victim of APP Fraud may also obtain third-party disclosure orders against parties such as banks to obtain information which may assist in recovering the misappropriated funds.

Often times, however, the victim of APP Fraud has little recourse against the fraudster who would have absconded or is nowhere to be found. The victim may then seek to recover his losses from the bank on the basis that the bank had failed in its duty to act with reasonable care and skill when executing its customer’s payment instructions in circumstances where the bank is put on enquiry that its customer might be defrauded.

This article seeks to shed light on whether such a claim against the bank may succeed in Singapore and the extent of the bank’s duty especially in the context of APP Fraud. To view or download the full article, click here.