Suspect payments - when should a bank say no?

Scams - when is it ok for banks to say “no” to a customer payment instruction?

The story attached ⬇️ is a good case study of the challenges faced by banks when it comes to following a customers payment request.

Although this appears to be a very difficult scenario for the bank, it boils down to a simple choice of balancing the following two risks:

1. Risk that a customer loses $250,000 to a scam (and maybe the bank is somehow found liable later down the line?)

vs

2. Risk of litigation or reputational damage from a customer who incurred losses because the bank refused to follow their payment instruction

(In many countries, it is “technically” illegal for a bank not to follow a customers payment instruction)

Within banks, this kind of complex decision requires a mature risk management framework and experienced people

Often, the signs of a scam are very clear and it simply takes someone senior within the bank to confidently say “no”, no matter what the customer is prepared to sign.

I first saw this kind of risk management call being made to good effect in a UK bank in 2013, after a vulnerable customer insisted on continuing to send his life savings to a scammer against bank advice. Eventually (after £250,000 had already been

sent, the bank called time on it). The bank developed its risk stance on scams from there.

Sadly, if a bank chooses not to intervene in a highly suspicious transaction made by a vulnerable customer, there’s a real danger that the very payment systems that are meant to enhance and enable our modern lives are actually facilitating a customers financial demise. It’s a tough one.

But sometimes you just need to do the right thing

https://www.straitstimes.com/singapore/woman-gave-250k-to-scammers-despite-frozen-bank-accounts-police-advice.