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Elderly victims of scams and the financial ombudsman service

Older Australians are increasingly preyed upon by fraudsters

in Financial Negligence by Jessica Latimer on
Elderly victims of scams and the financial ombudsman service

As our population ages, our vulnerable elderly people are increasingly falling victim to elder abuse perpetrated by adult children, family members, friends and carers.  But older Australians are also increasingly preyed upon by fraudsters.

The Financial Ombudsman Service (FOS) has recently published two determinations which consider whether the older person’s bank is liable for “allowing” them to transfer funds. 

In the first case (Case number 431342, 2 December 2016), the Applicant transferred $123,019 from his bank account to a fraudster who kept the funds.  The Applicant claimed the bank should compensate him for his loss.  FOS found, however, that the bank did not cause or contribute to his loss – that the funds transfer was authorized.  The bank drew the Applicant’s attention to the fact that the transaction may amount to a scam but the Applicant decided to proceed in any event.  In that context, the bank was required to act on the valid instruction from its customer. 

In the second case (Case number 472675, 2 August 2017), the Applicant requested in branch that his bank transfer funds overseas.  The Applicant was a regular visitor to that branch, and was known to the bank staff.  The proposed transfers were significantly out of the ordinary for the Applicant.  The Applicant also had appointed a Power of Attorney.  The Applicant made two transfers of over $100,000 each.  FOS determined that the bank should compensate the Applicant for his losses for the following reasons:

  1. The bank should have contacted his appointed attorney to discuss the proposed transactions. If they had done so, it is likely the transfers would not have occurred
  2. While the banker / customer relationship is one of contract only, if something additional is known to the banker about the transaction which would cause a reasonable banker to ask questions about the instructions, they should do so
  3. FOS referred to the Australian Banker’s Association Industry Guideline called “Protecting vulnerable customers from potential financial abuse” which sets out best industry practice and includes, among other things, asking questions about the proposed transaction and elevating the situation to a branch manager who can help assess whether the transaction should be processed or whether legal / compliance / fraud department advice should be sought

While these two determinations are of great interest to the banking sector, it is also a good reminder that in some circumstances, an older person being the victim of a scam or fraud can recover losses from the financial institution. 

Our elder abuse lawyers provide free initial telephone advice to older people or their representatives on losses suffered as a result of elder financial abuse or scams.

If you would like to enquire about an elder abuse claim, simply get in touch online or call us on 1800 555 777 .