Online Banking Fraud: Can I Get My Money Back?

Banking is increasingly done on computers and mobile phones instead of at bank counters. As a result, fraudsters now aim to get access to accounts via online banking in order to steal money. This guide from comparison service moneyland.ch explains who is liable for losses resulting from fraudulent transactions, and how you can protect yourself.

How common are fraudulent transactions?

No concrete figures are available. But according to the Swiss Banking Ombudsman, the numbers of these kinds of fraudulent transactions have increased in recent years. Other market observers also believe that these incidents are currently on the rise.

The banks themselves are not particularly forthcoming, even when asked. If they share any information at all, they usually emphasize that these are individual cases.

Is the bank liable for fraudulent transactions?

That always depends on the specific case. In its annual report, the Swiss Banking Ombudsman writes that a bank is normally only liable if it is found to be at fault of having breached its contractual responsibilities. If you incur a loss because of your own failure to perform the necessary due diligence, then liability for the loss typically falls on you. If, for example, you fail to log out of your online banking portal when using a public computer, or if you accidentally share your login information with third parties, then you have failed to perform your due diligence responsibilities.

In practice, financial services providers generally take the position that fraudulent transactions can only occur if customers fail to perform due diligence. But when there is no way to prove who is at fault, then the case may depend on the account’s terms and conditions and on the burden of proof, according to Harald Bärtschi, a lawyer at the Zurich University of Applied Sciences, in response to a moneyland.ch inquiry. If it is impossible to prove that either the bank or the customer failed to perform due diligence, and the cause of the incident is unclear, then the bank may have to cover the loss.

In this case, the bank is not liable for the fraudulent transaction, but it is still required to fulfill the customer’s claim for repayment of the original account balance. However, banks can transfer this risk to their customers by adding relevant clauses to their terms and conditions. Which terms and conditions you as the affected customer have agreed to plays a role in the outcomes of cases where liability is difficult to determine.

Can banks refuse to accept liability?

The terms and conditions of Swiss banks are full of liability exclusions. But not every exclusion is actually legally valid. In principle, a financial service provider cannot refuse to accept liability for losses which result from gross negligence on its part. For companies which are regulated by the federal financial supervisory authority, liability exclusions for petty negligence may be considered invalid by a court of law. Additionally, there is also a rule which can be applied that renders irregular clauses in contracts not legally binding.

According to legal expert Bärtschi, Swiss courts are very forgiving when it comes to the validity of terms and conditions. What that means for you is: If clauses in an agreement’s terms and conditions do not contradict the rules mentioned above, they will likely be considered valid. However, if there are clauses which are not worded clearly, these will be interpreted in a way which favors you as the customer.

In which cases are banks likely to be accommodating?

Even if the financial service provider disputes their guilt and denies all liability, they may still choose to voluntarily offer you compensation. The banks do not reveal how exactly they determine whether and how much they pay. Each case is usually examined separately.

Financial services providers sometimes offer higher compensation after the defrauded customer appeals to the Swiss Banking Ombudsman. This is shown by Ombudsman reports on real cases.

What should I do when the bank offers compensation?

Often, the compensation offered is less than the full amount which you lost due to fraud. If you believe that the bank should accept more liability and are willing to take legal action, then you should proceed with caution. Bärtschi advises not to accept the lower compensation if you hope to pursue a higher payment from the bank. The reason is that financial services providers only offer compensation in exchange for your forfeiting your claim to the higher amount which you lost.

Can I insure myself against fraud?

There are two different insurances which can be beneficial to have if you fall victim to fraud. Some cyber insurance offers can be used to protect your finances from fraudulent credit card and online banking transactions. It is important though to check exactly what kinds of financial services are actually covered. For example, some insurance offers exclude online banking from this coverage.

If you are worried that your bank may try to evade its legal liability for fraudulent transactions, then having personal legal insurance can make sense. This insurance does not cover losses which you incur because of fraud, but depending on the circumstances, it does cover the cost of taking legal action against the bank in order to recover the lost money. Here too, it is important to understand that not all legal insurance offers cover these kinds of fraud. Fraudulent credit card transactions and identity theft typically fall under Internet law. In some cases, you may have to add this coverage to your legal insurance as an optional insurance rider.

Always remember that you must have the insurance before the incident occurs in order for it to be covered. If you get insurance after the incident occurs, your new insurance will not pay.

What should I do if I fall victim to fraud?

If you believe that a fraudulent transaction was made from your bank account or credit card, you should contact the provider of the affected financial service as soon as possible and have them freeze the account. In some cases, the fraudulent transaction can be averted – by cancelling the order, for example. Many service providers are accommodating in these situations, even when liability for the loss rests on you as the customer.

If you believe that your bank is responsible for the incident, and not you, you can turn to the Swiss Banking Ombudsman. This office mediates disputes between Swiss financial institutes and their customers, and may be able to find a favorable solution without your having to take legal action. You can submit your complaints in writing or over the telephone.

If you are considering taking legal action, then getting legal consultation is beneficial. If you have personal legal insurance, your insurance may entitle you to complimentary legal consultation.

How can I protect myself from fraud?

Handling sensitive information carefully is an important requirement for protecting yourself from fraud. Phishing remains one of the most common tactics used by fraudsters to obtain your log-in and credit card information. You can find out how to recognize and protect yourself from phishing attempts in the moneyland.ch guide to protecting yourself from online fraud. You can also refer to the overview of common online fraud schemes.

There are also online platforms which provide information about the latest widespread fraud schemes. One example is the website Cybercrimepolice (in German), which is run by the Zurich cantonal police bureau. Some banks – Credit Suisse, for example – publish overviews on their websites.

Make sure to keep your applications updated with the latest updates, and use antivirus software on all your devices.

More on this topic:
Personal cyber insurance explained
Compare personal legal insurance offers now
How to protect your money from phishing
Online scams and fraud: How to protect yourself