Who bears the loss in payment fraud? A recent court decision provides clarity

Cybercrime and email payment fraud continue to rise, creating significant risks for businesses transferring funds electronically. A recent court decision serves as a timely warning for businesses that relying solely on emailed banking details can be risky, and that parties involved in a transaction may be expected to take reasonable steps to verify account information.

 

The case reinforces the importance of implementing strong payment verification procedures. Businesses should not assume that payment instructions received electronically are genuine, particularly where bank account details have changed or communications appear unusual.

 

Why this decision matters

Where fraudulent account details are provided and funds are misdirected, the financial loss may not automatically fall on the party whose systems were compromised.

 

Practical steps to reduce risk

Businesses should consider:

• Verifying any change of bank account details by telephone using a trusted contact number.
• Establishing internal payment verification protocols.
• Training staff to identify phishing emails and business email compromise scams.
• Requiring dual authorisation for significant payments.
• Regularly reviewing cybersecurity measures and financial controls.

 

The key takeaway

This decision is a timely reminder that cyber fraud is not only an IT issue but also a legal and commercial risk. Businesses that fail to verify banking details may find themselves bearing the loss.

 

Need advice?

If your business has been affected by a fraudulent payment, email compromise, or dispute over misdirected funds, our team can help you understand your legal position and explore recovery options. Contact our experienced commercial litigation and dispute resolution lawyers today for tailored advice and prompt assistance.