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Article by listed attorney: Fawzia Khan

What are the bank’s obligations when a customer opens a bank account? Can a bank be sued if someone has suffered a loss after making payment into a fictitious bank account, or if a person has became a victim of a scam?  Banks have a duty of care in terms of statue as well as common law to their customers.

What does a duty of care mean? Well basically it means that the bank must be cautious and reasonable when dealing with others. If not then the bank could be perceived as being negligent and face a possible damages claim for any losses suffered as a result of such negligence.

When a person opens a bank account, the bank has a common law duty of care to make sure that the owners of cheques are protected against fraud.  Banks are required in terms of The Financial Intelligence Centre Act [FICA], to make sure that when a new account is opened, they verify the identity of their clients thoroughly. The banks operate a system known as “Know Your Client”, where the bank is required to obtain information about the customer. This serves to act as a safeguard against money laundering or any criminal activity from taking place. In terms of FICA, the bank is supposed to get original and proper documentation relating to identity of a person and where applicable, the authority of a person to open a bank account, if the account is in the name of a company, close corporation, trust. The bank is required to obtain the customer’s proof of residency, the place of business or employment, original identity document or valid passport if not South African, and if the entity is not a natural person, all the supporting relevant documents, such as the constitution, memorandum of incorporation, founding statements etc.

If you can prove that the bank failed in its duty of care, you would be entitled to claim compensation from the bank for losses you suffered. If a bank receives money on behalf of a customer, in circumstances where that customer fraudulently received such payment into his account and the bank did not properly verify that customer at the time when the account was opened, then the bank would be regarded as being negligent and would have to compensate the complainant. The bank would also face a penalty for contravening the statutory law.

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