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I'm interested in what happens when money is stolen from a UK bank account. I have read on the Citizens Advice Bureau website that

Your bank should refund any money stolen from you as a result of fraud and identity theft. They should do this as soon as possible - ideally by the end of the next working day after you report the problem.

The bank can refuse to refund you if they find you acted fraudulently or were ‘grossly negligent’ - for example, if you shared your pin or password with someone else.

I'm looking for clarification of a couple of statements in this quote.

I see that my "bank should refund any money stolen from [me] as a result of fraud and identity theft". What obligation are banks under to do this? Would it be reasonable to expect the same protection under these circumstances from a well-established bank as from a newer challenger bank?

I'm also interested in knowing what would classify as "grossly negligent" under these circumstances. I'm confident enough that I'm not going to share my pin number with anyone that I don't feel that I need to worry about the example they give.

  • What if I had my password written down on a piece of paper in my house and someone broke into my house, found this piece of paper and used it to log into my bank account?
  • What if I lost my phone while I was out, and the person who picked it up was able to log on using the internet banking app on my phone?
  • What if; I used same weak password on my internet banking as I did on another less secure website. Someone gained access to the password by hacking into the other website and were then able to use this to get into my bank account?

Personally I consider writing my passwords down on a piece of paper to be reasonably secure, and using the same weak password on different websites including my bank account to be insecure. It would be interesting to see if either are classified as grossly negligent.

Any links to further reading about this, maybe wording of some related laws, would be appreciated.

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  • I believe, as a result of PSD2 and the ability to shift liability to the customer when a PIN is used, nearly all UK banks now require a PIN via card reader to make any transaction of value through their website.
    – user71659
    Jun 27, 2021 at 22:09
  • In the first two cases you should report the breach of security to the bank. As long as you do this promptly you should be OK. In the third you are acting against the explicit instructions of the bank regarding passwords. But the reality is that you would have to take each case individually. Banks are not going to guarantee your money back for any behaviour that is insecure.
    – DJClayworth
    Jun 28, 2021 at 1:44
  • What's important is that this applies for cases when the bank hands money to someone who isn't you, thinking it's you. If you voluntarily send money to a scammer, that's not covered.
    – gnasher729
    Jun 28, 2021 at 9:40
  • @user71659 mentioned the shift of liability to the customer when the PIN is used as part of the theft. At the time this was done it was widely assumed that the banks considered any circumstances where someone else had your PIN to be your fault, due to your negligence in securing your PIN basically. I don't know how often, if ever, the banks refund money when the thief had your PIN. That would be useful information for you I think.
    – Eric Nolan
    Jun 29, 2021 at 10:02

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There are no laws requiring banks in the UK to refund a customer's money after they get defrauded. Such a law, if it were to exist, would create an incentive for people to collaborate to "defraud" themselves, knowing that they would get reimbursed. In fact, not only is there no law requiring banks to refund account holder money, but the law specifically states that a bank does NOT have an obligation to refund an account holder's money.

Nevertheless, banks will always reimburse a victim who they believe to be an innocent victim, because otherwise the publicity for the bank would be bad. Banks will generally not reimburse anyone that they suspect as having a hand in the fraud, or who has authorized the payment, as is often the case.

(Note that a commenter to my post incorrectly claims there is some kind of regulatory rule that forces banks in the UK to refund account holders who lose money to fraud. Not only is this untrue, but is unlikely to ever happen for reasons stated in my first paragraph above. A recent study showed that 43% of fraud victims received reimbursement. So, the commenters assertion that fraud victims get reimbusement as a matter of course is just a lie. There is a subdivision of the Financial Conduct Authority called the "Payment Systems Regulator" that has been attempting to get such a rule passed since it was created in 2013(?), however, as of now, these attempts have had no effect. This spring the PSR has been "soliciting comments" on their latest attempt to get such a rule to be written. The "finanical ombudsmen" mentioned by the commenter is simply another court and there is no guarantee whatsoever that they will rule that an account holder's money will be refunded. According to the Ombudsmen's web site, in the most recent quarter they granted compensation or relief in 33% of the complaints. The "rules" mentioned by the commenter state only that an institution "should" refund money "if the payment was unauthorized" by the account holder. Of course, in most cases of fraud, the account holder did authorize the payment. That's the whole point of fraud, to trick someone into authorizing a payment.)

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    There may not be a law, as such. But the Financial Conduct Authority has told the banks that they will refund innocent victims of fraud, and th e Financial Ombudsman will enforce those rules. The banks have no choice in the matter.
    – Simon B
    Jun 29, 2021 at 10:55
  • In the article showing that 43% of victims were reimbursed, it also says that this varies wildly by bank, with some reimbursing at less than 1%. Do you know of a breakdown of this data by different banks?
    – Joe
    Jun 29, 2021 at 12:50

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