Caroline Greenwell and Bella Henry write for Law 360 on the Santander fraud ruling and what it means for the UK banking sector

In an article for Law 360, Caroline Greenwell, Partner, and Bella Henry, Associate, explore the implications of the recent High Court ruling in Santander UK PLC v. CCP Graduate School Ltd. for the UK banking sector.

The court ruled in favour of Santander, determining that the bank did not owe a duty of retrieval to CCP, a third-party victim of authorised push payment (APP) fraud. This decision clarifies that banks are not obligated to retrieve funds for third parties with whom they lack a contractual relationship, reinforcing their duty to comply with their own customers' instructions.

The case involved CCP transferring £416,000 to a Santander account, mistakenly believing it was a legitimate payee. The funds were subsequently moved out by fraudsters, prompting CCP to claim Santander had a duty to prevent its accounts from being used for fraud. The court rejected this claim, citing the absence of a retrieval duty and the impracticality of imposing such a duty on banks, which would conflict with their contractual obligations to customers.

The judgment is significant for the banking sector, as it reaffirms banks' existing practices in handling APP fraud and maintains their operational standards without imposing additional burdens. It also highlights the limitations of the Quincecare duty, which applies to preventing fraud by an agent of the bank's customer, but not in cases where the customer themselves authorises the payment.

The article discusses the Mandatory Reimbursement Requirement (MRR) introduced in October 2024, which mandates reimbursement for APP fraud victims up to £85,000, shared between the paying and receiving banks. However, the MRR has seen limited claims, suggesting it may not be functioning as intended.

Future developments, such as the appeal in Terna doo v. Revolut and potential reforms from the integration of the UK payments regulator into the FCA, may offer new directions for addressing APP fraud.

Read the full piece in Law 360 here (subscription required).