Islamabad August 23 2023: President Dr Arif Alvi has directed two private banks to return a collective sum of Rs 4.1 million to four customers, who were swindled out of their money by fraudsters.
The president gave these remarks while rejecting three representations filed by Muslim Commercial Bank (MCB) and one by Allied Bank Ltd (ABL) against the orders of the Banking Mohtasib directing these banks to refund the lost amount to victims of bank fraud.
The banks had activated the Electronic Funds Transfer (EFT) without obtaining the consent of the customers and were found negligent in complying with the State Bank of Pakistan’s various regulations regarding online fund transfer facilities, disclosing the terms of fund transfer in a clear and simple language to customers, and assigning limits to fund transfer.
President Alvi said that the loss of money occurred due to the reason that the banks made EFT operational without the account holders’ request, therefore, the banks committed maladministration and were liable to make good the loss of the customers.
As per details, Sumera Allahditta, Afzal Abbas Kazmi, Farah Muhammad Khan, and Dr Kanwar Shakeel Ahmed (the complainants) lost Rs 1,558,700, Rs 985,000, Rs 960,000, and Rs 598,000 respectively when these amounts were transferred from their bank accounts without their consent.
Dr Kanwar received a call from a number resembling ABL’s helpline and asked for his personal banking information to update the bank account. After he shared his banking information, Rs 598,000 were transferred from his account.
Sumera, Afzal, and Farah found out that huge amounts were missing from their bank accounts even though they hadn’t shared their personal details with anyone. They separately approached the banks for the refund of lost amounts but to no avail.
Feeling aggrieved, they filed complaints with the Banking Mohtasib (BM) which ordered the banks to refund their amounts as maladministration had been established on the part of the banks. The banks, however, filed representations with the President against BM’s decisions.
The president observed that the complainants had not requested their respective banks to open EFT facilities and the banks also did not put in place adequate systems and controls to mitigate the risk of fraudulent activities. He said that the fraudsters took advantage of banks’ weak systems and controls and managed to get themselves registered and conducted disputed transactions. He also noted that new devices for conducting online transactions were registered with the banks only a few days before the fraudulent transactions were conducted.
The president further stated that the banks were found negligent and in non-compliance with SBP’s rules and regulations on obtaining the consent of customers before opening online fund transfer facilities, informing the customers about the pros and cons of EFT facility in writing in simple language, and transaction limits. He said that the banks’ stance that OTP was utilized for conducting transactions and was considered as customers’ consent was preposterous. He highlighted that the first step was obtaining the consent of the customer for opening the EFT facility and the second step was the customer’s authentication for security before conducting the transaction.
He added that the banks were mixing two separate steps with each other. President Alvi concluded that the banks were given ample opportunity to controvert the claims of the customers and present evidence that customer consent was obtained. He held that had the EFT channel not been opened without consent, the customers could have avoided financial loss.
“The banks failed to discharge the burden and statutory liability cast upon them under the law, hence, maladministration on the part of banks was established”, he said. The president, therefore, rejected the representations of banks and directed them to pay the collective sum of over Rs 4.1 million to the aggrieved customers.
