What happens to financial losses suffered by banking customers following a kidnapping?

Nerosha Maseti

“A panel discussionaround this new trend was held at the banking division's recent annual banking workshop. The discussion focused on incidents such as kidnappings and how digitisation has facilitated easier access to banking consumers’ funds for criminals. The discussion also explored possible and available measures to help banking consumers safeguard their financial information and mitigate financial losses,” says Nerosha Maseti: lead ombudsman - banking division, National Financial Ombud Scheme (NFO).

Investigation and findings

A possible reason fraudsters are turning to this new modus operandi is that banks have implemented various layers of security on their online platforms. These measures are making it increasingly challenging for fraudsters to easily obtain confidential banking information from banking customers.

“When investigating kidnapping-related complaints reported to the NFO, it has been identified that criminals force the banking customer to disclose their online banking and banking app passwords under the threat of violence (duress) after kidnapping and detaining them. Once criminals gain access to these platforms, they can alter account limits and make unauthorised transfers leading to significant financial losses in addition to the trauma of the kidnapping itself,” says Maseti.

Maseti points out that, when investigating banking complaints, it is important to first understand the purpose of the NFO. The primary purpose and mandate of the NFO is to investigate and resolve consumer complaints against financial service providers in the banking, insurance (life and non-life) and credit space.

“When a customer submits a complaint regarding losses suffered due to the forced disclosure of confidential banking information following a kidnapping, the NFO’s banking division investigates the case thoroughly, and the resolution is based on the merits of each individual matter. In investigating such complaints, the investigation will typically involve ascertaining whether there was wrongdoing or negligence on the part of the bank that caused the customer’s losses or contributed to them. If, after investigation, it is found that the bank could have prevented or mitigated the customer’s losses but failed to do so, the NFO’s banking division has the power to recommend to the bank involved to refund the portion of the customer’s losses that could have been prevented but for the bank’s negligence,” says Maseti.

As an independent organisation, the NFO is unwavering in its commitment to resolving disputes impartially and at no charge to the complainant. The NFO ensures that banks treat their customers fairly and in compliance with their own policies, procedures and all applicable laws, regulations, and codes of conduct.

Case study

In a recent investigation, a complainant was kidnapped and forced to disclose their online banking credentials, resulting in unauthorised transactions totalling R103,092. The bank’s fraud monitoring system flagged the activity on the complainant’s accounts and contacted the complainant, who confirmed the validity of the payments (under duress). After being released, the complainant reported the incident to the bank and sought a full refund. The bank rejected the claim, citing that the complainant had disclosed their confidential banking information.

“The NFO’sinvestigation considered the contract between the parties. The contractual terms and conditions of the bank’s online banking platform state that if a third party gains access to a customer’s online banking profile, the customer is held liable for all transactions occurring before the bank is notified of unauthorised and/or fraudulent transactions. As part of the investigation, we also considered the actions taken by the bank once the incident was reported. Unfortunately, all the funds transferred out of the complainant’s accounts had already been utilised prior to the bank being made aware of the incident. Therefore, the bank was not found negligent in mitigating the complainant’s loss. Given the merits of this matter, there were no legal grounds on which we could hold the bank liable for the complainant's loss. The complainant was essentially a victim of a crime in which the bank was not involved. However, the bank agreed to refund a portion of the loss as a gesture of goodwill, based on its commercial discretion,” says Maseti.

When a banking customer compromises their confidential banking details, they are usually held liable. However, liability shifts to the bank once the compromise is reported. Upon notification, the bank has a duty to mitigate any losses.

Each case must be assessed on its own merits, and the specific facts of the matter guide the findings of the NFO. Even if liability is attributed to the consumer, the bank may still consider the customer's personal circumstances and vulnerability and, in some cases, offer a partial refund as a gesture ofgoodwill.

Maseti points out that there is a lot to consider regarding this issue. Banks have the difficult task of confirming the alleged criminal claims and that the confidential information was, in fact, disclosed under duress.

Tips for prevention and mitigation

With this type of crime increasing, consumers can take a few measures to protect themselves and mitigate significant damages. The tips identified below are similar to those for any hijacking risks.

• Be cautious when posting online. Avoid posting sensitive financial information or sudden changes on social media. It is extremely important to be vigilant about what information you share on social media and the perceptions you create about yourself, your family, and your friends. Avoid posting about sudden influxes of funds, as this can make you a target for criminals.
  
• Do not draw unwanted attention to yourself. Wearing expensive jewellery, carrying high-end branded items, or carrying other valuables in public may attract unwanted attention.
  
• Vary your daily routine as often as possible. Diversify your daily activities to reduce predictability. Criminals may monitor predictable routines well before the actual crime is perpetrated in order to ensure that they are vulnerable to criminal targeting.
  
• Consult your bank. Discuss the measures your bank may offer to help mitigate potential losses if you become a victim of any type of banking fraud. Many banks provide options to tailor your online banking and app experience, including limiting your exposure and risk.
  
• Consider investment options. Use accounts with restricted access to limit potential losses. In some instances, investing in a notice account may reduce access to your funds, thereby limiting your overall loss.

Consider insurance. Check if your bank offers duress insurance or trauma counselling services. These may help in tough situations.

“Finally, consumers are urged to remain vigilant and to take proactive protective measures. If you fall victim to such crimes, report the incident to the SAPS and the relevant law enforcement agencies to investigate and prosecute the perpetrators of the crime,” says Maseti.

If you have been a victim of a crime of this nature and have a complaint against a bank, you are welcome to contact the NFO for free assistance. For more details, please visit www.nfosa.co.za or contact 0860-800-900.