Paying by electronic funds transfer (EFT) is incredibly convenient, but this convenience does not come without risks says Louis Podbielski of Case Law product manager at LexisNexis.
Criminals are experts at intercepting emails from senders, inserting their own bank details and sending the email on so that it looks like the genuine sender’s email and address, he said.
“Once your money reaches these fraudulent accounts, it gets spirited away and you still owe the person, shop or supplier that was supposed to receive the funds in the first place.
“Despite FICA requirements on bank accounts, the case law shows that you have little chance of recovering the money or catching the culprits.”
Below he outlined two recent cases which dealt with EFT fraud and how the courts dealt with them.
In Galactic Auto (Pty) Ltd v Venter a businessman bought a Ford Ranger that he urgently needed for a new business project, said Podbielski.
“He did an EFT in response to an email that he received and was expecting from the car dealership.
“He took delivery of the Ford Ranger, with it later emerging that the transfer had gone into a fraudulent account. The dealership then claimed the R380,000 purchase price from him.
“In this case, the court found that he should have verified the account number, before making the transfer and that he still owed the car dealer the money.”
Criminals are also known to target attorneys because they often have large amounts in their trust accounts, and they regularly make substantial payments to new payees.
In the case of Fourie v Van der Spuy and De Jongh Inc the client put funds into the attorneys’ trust account, but due to a fraudulent email, the attorneys paid over R1.7 million into an account from which the money disappeared, he said.
“The court noted that the Attorneys Fidelity Fund had issued a risk alert to attorneys, warning that cyber risks were increasing and that attorneys must take adequate risk mitigation measures.
“The court found that the attorneys should have taken precautions and that they were liable, especially based on their duty of care towards the client.
“These two cases show that the risk of EFT fraud is becoming so real and that parties cannot merely accept bank details supplied by email, even if the email appears genuine and seems to come from the correct sender, at the expected time. Precautions must be taken to verify the bank details, before making the transfer.”