Santander UK Wins Legal Battle Over Bank’s Duty to Retrieve Fraudulent Funds

The UK division of Spain’s Banco Santander has successfully defended itself against a lawsuit filed by CCP Graduate School, which had argued that banks have a duty to attempt to recover funds stolen by fraudsters operating as customers. The case, which was dismissed by London’s High Court, centered on a claim brought by the teacher training provider after it was defrauded out of £415,000 ($537,000) in an authorised push payment (APP) scam.

CCP Graduate School had transferred the funds from its NatWest account into an account held at Santander, only to later discover that the recipient was a fraudster. APP fraud is a scam in which individuals or businesses are tricked into sending money to criminals posing as legitimate payees. The issue is widespread in Britain, with UK Finance reporting over 232,000 cases of APP fraud occurring in 2023. In response to the growing threat, stricter compensation regulations came into effect in October 2024.

The training provider’s legal team contended that Santander had an arguable duty to take steps to recover the stolen funds, citing a 2023 Supreme Court decision in a similar case against Barclays. While the Supreme Court had largely dismissed the claim against Barclays, it acknowledged that banks could potentially have a duty to their own customers to attempt to recover fraudulently transferred funds. CCP Graduate School argued that based on this ruling, its case against Santander should be allowed to proceed.

However, London’s High Court ruled against the school, dismissing its lawsuit. The judge also noted that a separate lawsuit filed by CCP Graduate School against NatWest had already been thrown out the previous year.

Judge Jennifer Eady ruled that there was no legal basis for imposing a "freestanding duty upon a bank to take positive steps to unwind harm already caused to a third party" who was not a direct customer of the bank. She further explained that if CCP Graduate School’s argument were upheld, it would require banks to respond to every APP fraud allegation by contacting all other banks that had received subsequent transfers of the stolen funds and attempting to immediately recall the money or prevent its movement.

Considering the vast number of transactions banks process each month, such an obligation would place "an unacceptable burden on banks going outside their contractual obligations with their customers," Eady stated.

Santander has not yet issued a public response to the ruling.

By fLEXI tEAM