Law Firm Mikov&Attorneys successfully represented the North American subsidiary of a
multinational industrial and technology group in the first instance court proceedings against a
Bulgarian bank regarding damages due to non-compliance with EU and national law on funds
transfer requirements, money laundering and payment services. Almost four years after the
bank transfer and following preceding court and execution procedural actions, the bank „Ю. Б. Б.
АД“ was sentenced by Sofia City Court to pay a total amount of approximately BGN 300 000
compensation and court expenses.
Asset Recovery Case
Our client became a victim of a sophisticated ongoing criminal fraud scheme involving an
unknown number of organized participants from different countries. The fraudsters
succeeded in deceiving the victim to transfer significant amounts of money to the fraudster’s
bank account in the Bulgarian bank. The fraudsters represented themselves as a partner
with whom our client had a long-term business relationship. So, our client wrote the real
name of its partner and the fraudster’s bank account in the payment order. In just a few
days, after our client understood about the scam, it requested from its bank to cancel the
transfer. Despite the rapid reaction, the payee’s bank did not block the funds in time or return
them to our client. Instead, the payee’s bank allowed significant amounts of money to be
transferred from the scammer’s account to third parties. Thus, we were able to recover only
a part of the client’s funds after successful litigation against the fraudsters.
Tort Liability
According to Bulgarian law, everyone is obliged to remedy the damage it has wrongfully
caused to another. One who has assigned any work to another person shall be liable for any
damage caused by him/ her in relation to the performance of that work. Such liability has a
warranty function. It does not arise from the fault of the person who assigned the work, but
occurs when the person charged to carry out a particular work causes damage in
connection with the performance of the work assigned to him.
Litigation Bulgarian Bank
The payee’s bank, as a payment services provider, is obliged to comply with the Bulgarian
and European laws, including but not limited to: Regulation (EU) 2015/847 of the European
Parliament and of the Council of 20 May 2015 on information accompanying transfers of
funds, Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May
2015 on the prevention of the use of the financial system for the purposes of money
laundering or terrorist financing, Law on Payment Services and Payment Systems, Law on
Measures against Money Laundering, etc.
Can the bank be held liable for its wrongdoings in such cases for the damages, suffered by
the victim, in the amount of money that could not be recovered from the fraudsters?
Evident from the reasoning of the judge the bank, through its employees, should fulfill its
obligations for each money transfer especially in case of a suspicion of fraud, money
laundering and/ or terrorist financing, namely:
– the bank has to pay attention to the information written in the payment order and in
case of some mismatch it should undertake the respective actions following the
Bulgarian and European laws and its internal rules;
– the bank should implement effective procedures to detect that substantial information
on the payee (its real name) is missing as well as procedures for verification of the
name and the IBAN;
the bank should implement effective risk-based procedures to determine whether
to execute, reject or suspend a transfer of funds lacking the required complete payer
and payee information and for taking the appropriate follow-up action;
– the bank should not have allowed the outgoing transfer from the fraudster’s account
after being explicitly notified by our client’s bank about the fraud and receiving an
indemnity letter.
Conclusion
Thus, the judge concluded that the bank should have executed its obligations very carefully
especially in case of a suspicion of money laundering and/ or terrorist financing as the
present case, and as it had not, it should be liable for nonfulfillment of the respective
Bulgarian and European laws. Should the payee’s bank treated the transfer of our client
with the required attention considering the signs for fraud and imposed AML measures, it
should have undertaken the respective actions and prevented the damages to our client. Due
to the causal connection between the wrongful actions of the bank and the damages, the
bank should pay the awarded compensation to the client.
Given that the court decision sets up a precedent we expect that the bank will appeal it
before the second instance court.
