UK Supreme Court Rules Customers Liable for Fraud Through Bank Accounts

The United Kingdom’s Supreme Court has reportedly ruled that customers are liable for fraud through their accounts when the bank carried out instructions expressly authorized by the customer.

The court ruled that Barclays Plc, the bank responsible for the payment in this case, was in fact duty bound to comply with its customers’ instructions, Bloomberg reported Wednesday (July 12).

The judges said, per the report, that placing a duty on the bank to stop payments expressly authorized by the customer “is inconsistent with the first principles of banking law.”

Customers can no longer be compensated for a fraudulent payment if it was made pursuant to their authorizing instructions, according to the report.

Barclays can still face a trial on whether it attempted to recover the money quickly enough after the transaction was found the be fraudulent, the report said.

A bank spokesperson told Bloomberg that the court’s decision provides “certainty and clarity on an important issue of law and public importance.”

When it comes to authorized push payment (APP) fraud, the U.K.’s Payment Systems Regulator announced upcoming rules last month that will require banks and payment companies to reimburse victims, sharing the liability and providing more protections for vulnerable customers, according to the report.

The Supreme Court ruling requires banks to ensure they don’t make payments that have not been authorized by the customers, the report said.

“Anyone celebrating today’s ruling may be overlooking the recent changes to reimbursement rules, which essentially require banks to reimburse consumers’ money lost through APP fraud,” Conflict International CEO Mike LaCorte told Bloomberg.

Under the Payment Systems Regulator’s rules announced June 7, banks and payment companies will be required to split the cost of reimbursements 50/50 and reimburse authorized push payment (APP) fraud victims within five days.

“Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place,” Payment Systems Regulator Managing Director Chris Hemsley said at the time.

Fraudsters stole more than $1.5 billion in the U.K. in 2022, while the banking and finance sector prevented another $1.5 billion in unauthorized fraud from reaching criminals, UK Finance reported in May.