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Should Banks Reimburse Businesses For Fraud?

Should Banks Reimburse Businesses For Fraud?

June 01, 2021 at 01:00PM
by PYMNTS

Consumer fraud is an ugly beast, but often, individuals can sleep soundly knowing that instances of fraud are often covered by their banks. Corporates, however, don’t enjoy the same consumer protections, and there is no guarantee that a business will be reimbursed in cases of fraud.

Reports coming out of New Zealand may reignite a debate over whether financial institutions (FIs) should extend those same fraud protections over their business clients that they do for consumers. That’s in this week’s B2B Data Digest, which breaks down the latest numbers behind B2B payments fraud.

28 months in prison is the sentence for an Idaho individual who pleaded guilty to wire fraud charges, the Idaho State Journal reported. Law officials said the individual embezzled more than $1.6 million from a meat processing business, taking advantage of the professional’s position as manager of accounts payable (AP) and accounts receivable (AR). The fraud reportedly involved the creation of fake suppliers and 107 transactions paid to those false entities that were sent to the individual’s personal bank account.

$1,000 was lost from a Michigan Jimmy John’s restaurant as the result of a phone scam, according to a local report last week. An 18-year-old employee received a call from a fraudster posing as a corporate executive from the restaurant chain, claiming that the restaurant was under investigation for money laundering. The fraudster ordered the worker to take money out of the register to buy gift cards. Police are now probing the matter.

$30,000 was stolen from a New Zealand business after a hacker infiltrated the company’s systems, changed details on an invoice, and had that firm pay the bill to an overseas account instead of the account of the intended supplier, according to a Stuff report. It’s an all-too-common tactic of cybercriminals today, yet one that rarely results in businesses being able to recover the stolen funds — let alone be assured that their bank will reimburse them for any losses.

This case in New Zealand is raising new questions over who holds the responsibility for reimbursement, if anyone. Following a complaint filed with the banking ombudsman, which declined to name the parties involved, the ombudsman has reportedly ordered the business customer’s bank to reimburse the client after an investigation found that the bank failed to adequately communicate with its customer with regard to the overseas bank’s willingness to send back the funds upon receiving an indemnity, which the customer’s bank denied.

“We urge all customers to be extra careful online, and to contact their bank immediately if they suspect something has gone wrong,” said Banking Ombudsman Nicola Sladden in the report. “Scam complaints are on the rise, and the stakes are high.

$1.5 million was bilked from a San Diego tech firm from its own CEO, the Times of San Diego reported, noting that the individual was sentenced to more than four years in custody. The U.S. Attorney’s Office said the former CEO would commit business loan fraud by keeping loans intended for the company for himself and commercial card fraud by misusing company credit cards. He also stole funds directly from the company’s bank account. As a result, the company’s payroll bounced, which led to the discover of the scam. The firm was forced to let go of several employees due to financial troubles stemming from the ex-CEO’s behavior.