Banks face legal rulings over liability in major fraud cases

Courts in Spain and the United Kingdom are addressing the extent of banking liability in cases of sophisticated financial fraud.

A court in Barcelona has ordered a Spanish bank to repay 900,000 euros to a company victimized by a CEO fraud scheme. Scammers used voice-mimicking technology to impersonate the CEO of the company’s German parent firm, convincing employees to execute a confidential transfer. The court ruled that the bank failed to implement sufficient security measures and assisted in the transaction after technical issues prompted a change in the destination from Hong Kong to Portugal.

In the UK, Barclays is facing legal action regarding a pyramid scheme that defrauded thousands of people. Liquidators argue the scheme could not have operated without the bank’s services. The case focuses on the ‘Quincecare duty,’ which requires banks to refrain from executing payment orders if they suspect a representative is acting against the interests of their principal. While a previous ruling suggested banks are not liable when a customer is tricked into making transfers, this case examines whether the bank failed to act when directors issued orders contrary to the company’s interests.