President directs refunding Rs4.1m to bank fraud victims

ISLAMABAD   -  President Dr Arif Alvi has issued a directive to two private banks, instructing them to collectively reimburse a total of Rs 4.1 million to four customers who fell victim to fraudsters and had their money swindled.

These directives came following the president’s rejection of three representations filed by Muslim Commercial Bank (MCB) and one by Allied Bank Ltd (ABL) against the orders of the Banking Mohtasib, which had previously mandated these banks to refund the lost amounts to the victims of bank fraud.

The banks had initiated Electronic Funds Transfers (EFT) without obtaining the necessary consent from their customers. They were found to be negligent in adhering to various regulations set forth by the State Bank of Pakistan, which included guidelines for online fund transfer facilities, transparency in disclosing fund transfer terms to customers and setting limits for fund transfers.

President Alvi pointed out that the financial losses incurred by the customers were a direct result of the banks activating EFT without the account holders’ consent. Therefore, the banks were deemed to be guilty of maladministration and held accountable for compensating the affected customers.

In detail, the complainants - Sumera Allahditta, Afzal Abbas Kazmi, Farah Muhammad Khan, and Dr Kanwar Shakeel Ahmed - lost amounts totalling Rs 1,558,700, Rs 985,000, Rs 960,000, and Rs 598,000, respectively. These sums were wrongfully transferred from their bank accounts without their authorization.

Dr Kanwar received a call from a number resembling ABL’s helpline, where he was asked for his personal banking information to supposedly update his bank account. Unfortunately, this resulted in a transfer of Rs 598,000 from his account.

Sumera, Afzal, and Farah discovered significant sums missing from their bank accounts, despite not sharing their details with anyone. They individually approached the banks seeking refunds but were met with no success. Feeling wronged, they lodged complaints with the Banking Mohtasib, which subsequently ordered the banks to refund their losses due to the banks’ maladministration. However, the banks contested these decisions by filing representations with the President.

The President noted that the complainants had never requested their respective banks to activate EFT facilities, and the banks themselves had not implemented sufficient systems and controls to mitigate the risk of fraudulent activities.

He further highlighted that fraudsters had taken advantage of the banks’ weak systems and controls, managing to register new devices for online transactions just days before carrying out the fraudulent activities.

President Alvi also stated that the banks were negligent and failed to comply with SBP’s rules and regulations. These included obtaining customers’ consent before enabling online fund transfer facilities, informing customers in writing about the advantages and disadvantages of EFT in simple language, and establishing transaction limits.

He clarified that the banks’ argument that OTP (One-Time Password) usage constituted customer consent was unfounded. He emphasized that obtaining customer consent for opening the EFT facility was the initial step, followed by customer authentication for security before conducting any transaction. The banks, in his view, had conflated these two separate processes.

President Alvi noted that the banks had ample opportunity to contest the customers’ claims and provide evidence of obtaining customer consent, but they failed to do so. Consequently, he found that the banks had not fulfilled their legal obligations, thus confirming maladministration on their part. As a result, the President rejected the banks’ representations and ordered them to collectively repay the sum of over Rs 4.1 million to the aggrieved customers.

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