A recent ruling by the interim relief judge of the Amsterdam District Court provided an interesting decision on the issue of proof regarding banks’ duty of care to third parties in fraud cases. The case involved an American woman, a client of our firm, who had been the victim of a hack in which €200,000 had been transferred to the account of a money mule with an account at ING. Although the main claim was about repayment of the fraudulently transferred amount, the importance of this ruling lies primarily in what the court decided about ING’s duty of disclosure.
The Safe Haven doctrine
The ruling builds on the Supreme Court’s well-known 2005 Safe Haven ruling. There it was ruled that banks have a special duty of care to third parties because of their social function. The scope of this duty of care depends on the circumstances of the case. In later judgments, such as the Foot Locker cases against ING, this line was continued. It was ruled that banks must be alert to signs of fraud and intervene in a timely manner if suspicious transactions take place.
Subjective awareness of fraud
A crucial element in this type of case is the bank’s subjective awareness of the fraud. The burden of proof for this lies with the plaintiff who claims that the bank breached its duty of care. An important indicator of this awareness can be a so-called “fraud alert” generated by the bank’s transaction monitoring system.
ING’s objections to disclosure
In the present case, ING did not want to disclose this fraud alert information to the plaintiff. The bank argued that doing so would provide insight into sensitive control processes and could undermine the integrity of the financial system.
The domain doctrine and compensation of information deficits
To compensate for the plaintiff’s information disadvantage in this type of case, the court can make several decisions. This falls under the so-called “domain doctrine.” For example, the judge can apply Article 22 Rv to request additional information from the bank. However, since a plaintiff is unsure whether the judge will use this power, the plaintiff may also choose to request the necessary information through summary proceedings. This allows the plaintiff to better assess its litigation chances in advance and substantiate any claim against the bank.
The judgment
In this case, the preliminary injunction judge ruled that ING must disclose the date it became aware of the fraud to the plaintiff, including supporting documents. However, ING is allowed to make unreadable information that poses risks to its fraud detection systems. This ruling is an important step in increasing transparency around banks’ duty of care in fraud cases. It offers victims more opportunities to determine their position in any proceedings against banks that may have breached their duty of care.
