Transfer order sent by an employee who was the victim of fraud to the Chairman

The French Supreme Court ruled that the bank was not liable in the absence of any apparent anomaly in the disputed transfer orders.  

Court of Cassation – Commercial Chamber – May 2, 2024 – 22-18.454

Applying the criteria characterizing the existence of an apparent anomaly in transfers, the Cour de cassation ruled out the bank’s liability in the context of a swindle involving the president, and deduced that the exclusive cause of the damage suffered by the company resulted from the fault of the employee who had transmitted the disputed transfer orders.   Following on from our article published at the beginning of 2024 on the so-called “president scam” fraud, in May 2024 the French Supreme Court added to the significant litigation surrounding this issue. While the Paris Court of Appeal’s ruling of November 22, 2023, reviewed in January 2024, had found that the bank had failed in its duty of vigilance, this time the Court of Cassation, relying on the same bundles of evidence, held that the fault lay exclusively with the victim company’s employee, thereby ruling out any liability on the part of the bank. As a reminder, “president scam” or “president fraud” consists in the swindler impersonating a third party, generally the director or representative of a company, in order to ask an employee of the said company to make one or more transfers to a bank account. In the case submitted to the Cour de cassation for judgment in May 2024, a company employee (executive assistant) transmitted five international transfer orders from the company between February 2017 and March 2017, for a total sum of 850,684.07 euros. These transfer orders named companies domiciled in the People’s Republic of China as beneficiaries. Once the fraud had been discovered, the company sued the bank for restitution of the sums deducted, on the grounds that the orders bore a false signature, were accompanied by falsified invoices and had been drawn up in the absence of the manager by an employee, herself a victim of the fraud. The French Supreme Court upheld the position of the Toulouse Court of Appeal which, in a ruling dated May 18, 2022, had found that the bank was not liable for its duty of vigilance. The duty of vigilance is the bank’s obligation to exercise prudence and diligence whenever a transaction reveals an apparent anomaly, whether material or intellectual, in the documents provided, in the nature of the transaction itself, or in the operation of the account. In this case, to establish that the bank had not breached its obligations, the Cour de cassation ruled that the orders in question did not contain any apparent anomaly that would have obliged the bank to carry out specific checks, insofar as :

• The five disputed transfer orders were made on company letterhead.
• The signature on the transfer orders was not significantly different from that on the executive’s national identity card, a copy of which was held by the bank, regardless of how old the document was. (This differs from the decision commented on in January 2024, in which the judges found the bank liable on the grounds of a material anomaly affecting the payer’s signature).
• The transfer orders had been sent to the bank by a company employee, an executive assistant, who was the bank’s usual contact and whom the bank had contacted by telephone to confirm the orders. (On the other hand, in the judgment reviewed in January 2024, the Paris Court of Appeal took a stricter approach to the authenticity of the transfer order, considering that, as the employee had no power of movement on the account but only to transmit payment orders to the bank, with a limited validation ceiling, the bank should have checked with the person authorized to give and sign the payment order).
• Each transfer order was accompanied by an invoice from the supplier to establish the regularity of the transaction.
• The cumulative amount of the transfer orders did not exceed the company’s capacity. (On the other hand, the Paris Court of Appeal, in a judgment handed down in January 2024, concluded that “the reiteration of the transfer orders in question, for large and comparable amounts, given over a short period, characterized abnormal operation of the account”).

  Consequently, only a case-by-case examination of situations in which payment transactions have been ordered in the presence of fraud against the President will enable judges to hold the bank holding the account liable, in terms of the authenticity of the transfer orders and any apparent anomalies affecting them.   While the Court of Cassation ruled out any wrongdoing on the part of the bank in its ruling of 5 May 2024, it did find fault on the part of the employee who had obtained the signature of the director under suspicious circumstances and had sent the bank transfer orders enclosing invoices drawn up for the purpose, which she knew to be false.