Fraud in Online Banking – Bank’s Burden of Proof

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BGH Strengthens the Rights of Bank Customers – Case No.: XI ZR 107/22

It’s a shocking experience when criminals hack into online banking and make unauthorized withdrawals from an account. However, the Federal Court of Justice (BGH) has strengthened the rights of affected bank customers with its ruling on March 5, 2024 (Case No.: XI ZR 107/22). The BGH has stated that the bank bears the burden of proof in cases of unauthorized transactions.

When online banking data is hacked by phishing and other fraudulent methods, the initial shock for the bank customer is significant. The good news, however, is that in many cases, the bank is liable. The customer is only liable if they have acted with gross negligence, which the bank must prove. This has been confirmed by the BGH in its recent ruling, as noted by the business law firm MTR Legal Rechtsanwälte, which advises, among others, in banking law.

In the underlying case before the BGH, the plaintiff had several accounts with the bank. When she wanted to make transfers, she would send an email to her account manager with the payment recipient and the transfer amount. Sometimes the corresponding invoice was attached to the email. The account manager would then execute the transfer and send the client a confirmation via email. This procedure had been in place for years.

Fake Invoices Totaling 255,000 Euros

In early May 2016, the client met with her bank advisor to discuss the purchase of a condominium in London. The advisor was to transfer 195,000 euros from the checking account to the savings account. The bank advisor executed the order.

Subsequently, between May 11, 2016, and February 1, 2017, the advisor received a total of 13 emails with payment instructions. According to the sender’s address, the emails came from the plaintiff. Each email had the corresponding invoice with the amount and payment recipient attached. The account manager carried out the transfers as usual and sent the client a confirmation email. The payments went to recipients in Hungary, Dubai, and the United Kingdom, totaling around 255,000 euros during this period. However, the invoices were forged.

Although the plaintiff received her monthly account statements from the bank, she only noticed the transfers from May 11, 2016, in February 2017. She informed the bank that she had not authorized the transfers and demanded the reimbursement of the approximately 255,000 euros that had been fraudulently debited.

BGH: Bank Must Reimburse Loss

The BGH ultimately ruled in favor of the woman, ordering the bank to reimburse the 255,000 euros and thus confirming the judgment of the Higher Regional Court (OLG) of Karlsruhe. The transfers between May 11, 2016, and February 1, 2017, had not been authorized by the plaintiff. The bank had to demonstrate and prove that the plaintiff had authorized the transfers, which it failed to do, according to the Karlsruhe judges. In the case of an unauthorized payment transaction, the bank is obligated under § 675u sentence 2 BGB aF to reimburse the amount to the customer immediately.

After considering all the circumstances, it was not established that the emails with the transfer orders originated from the plaintiff. There was also the possibility of unauthorized access to the plaintiff’s email account by a third party, the BGH noted.

Bank Bears the Burden of Proof

Under § 675w BGB aF, the bank must prove the authorization of a payment transaction by the customer if this is disputed. The method of authorization can be agreed upon between the bank and the customer. Here, the bank had agreed to allow transfer orders via email. If the bank found the risk of bearing the burden of proof for authorization too great in such a procedure, it could have agreed on a different procedure, according to the BGH.

With this ruling, the Federal Court of Justice has made it clear that the bank bears the burden of proof and must prove gross negligence on the part of the customer, not the other way around. This significantly strengthens the position of customers who have fallen victim to fraud in online banking.

MTR Legal Rechtsanwälte has extensive experience in banking law and advises clients in legal disputes with their bank.

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