Banks ignoring Supreme Court's telephone fraud ruling

Newsletter: 🌾 No rain, no grain (2023-07-19)

Banks ignoring Supreme Court's telephone fraud ruling

You hear the stories all of the time. A neighbor was scammed out of their savings, a coworker was tricked into giving up millions, or an elderly relative fell victim to a financial scam. Telephone fraud is on the rise in Sweden, in fact, it's a multimillion-dollar industry. Nearly 22,000 people reported falling victim to financial fraud just last year, a nearly 86 percent increase from the previous year.

Despite its seemingly straightforward nature, this method of fraud is anything but simple; rather, it is often executed with remarkable sophistication. The perpetrators adopt various guises, posing as banks, debt collection agencies, police officers, and even healthcare centers. Caught off guard, unsuspecting victims find themselves being shuttled between different "experts" who skillfully manipulate them into authenticating their identities through bank IDs or devices. This trick typically involves convincing individuals to update their personal information or prevent fictitious fraud.

Unfortunately, falling into this trap grants the fraudsters complete access to victims' bank accounts, which they quickly empty of funds.

The money is often used in criminal activities, like the purchase of weapons .

Banks responsible

Telephone fraud is a direct consequence of the technological advancements pioneered by banks, with bank ID serving as a prominent example. Paradoxically, while banks have been at the forefront of such developments, security measures have often been neglected. Despite the widespread prevalence of fraud as a societal issue, most banks lack automated systems that can effectively halt suspiciously large transfers or transfers to unfamiliar accounts.

What is even more concerning is the banks' persistent refusal to compensate customers affected by fraud, despite the stance of the law on the matter. A landmark ruling by the Supreme Court last summer highlighted this disregard. In the case of Länsförsäkringar Bank, the court established that the institution was legally obligated to compensate an account holder who had fallen victim to a swindle, resulting in a loss of 400,000 kronor.

While the account holder was found to have been "grossly negligent" by giving away his account information, they were not found to be "particularly blameworthy" given that the victim was not aware of the consequences of their actions. The landmark distinction necessitates that the victim possesses awareness or, at the very least, indifference toward the consequences of providing bank and security information.

Changing recommendations

Last year the National Board for Consumer Disputes (ARN) changed its recommendation for banks, stating that they should compensate their clients who have fallen victim to fraudsters, in line with the Supreme Court ruling. But banks have largely resisted this and have refused to compensate defrauded clients.