Payments processing scam

The client was recruited by a company, via the Internet, to collect accounts receivable on their behalf. She would be sent cheques from Canadian companies to be deposited to her account. She would then wire 90 per cent of the amounts to designated third parties overseas, and keep 10 per cent as her collection fee.

The company gave her four cheques, written by companies, payable to her. All the cheques later turned out to be fraudulent.

Her account was charged for the unrecovered amount, resulting in an overdraft and accumulated interest totalling about $39,000.

The client felt the bank was partly responsible due to its failure to inform her of the possibility that cheques could be returned as fraudulent even after the hold period. She also felt the bank failed to question her regarding the unusually large deposits. The bank pointed out that standard procedure was followed when processing the transactions and that a release of a hold allows the customer to use the funds, but does not rule out the possibility of a cheque being later returned as fraudulent.

Our investigation revealed that the bank's staff had followed standard procedures and the client was primarily responsible for the losses. However, these losses might have been prevented by more detailed disclosures regarding the risk of cheques being returned after the hold period. Although we concluded that the overdraft interest rate charged was consistent with industry practice, a lower rate would better suit an overdraft caused by the inadvertent deposit of a fraudulent cheque.

We recommended that the client be held responsible for two-thirds, and the bank responsible for one-third of the loss. We also recommended the interest rate charged on the overdraft be reduced to a rate in line with the usual bank rate for high-risk loans, which resulted in an interest reversal of $1,250.

(2006)