Service provider must pay R3.1m taken by cyber criminals
Cybercrime was, once again, the topic under the spotlight when Gauteng High Court (Johannesburg) Judge Motsamai Makume found there was a duty on a financial service provider to protect its clients against cyber fraud which, in the case of the Rotary Club of Rosebank, was the victim of the crime.
A Pretoria News report says the organisation lost R3.1m when cyber criminals, purporting to act on instructions from the club, withdrew the money.
Makume found that the service provider and its officials who handled the club’s finances were grossly negligent in not verifying the ‘instructions’ by the club to transfer the money to various entities.
The fraudulent transactions were made possible by fraudsters having hacked into the email address of a Mr Franklin, the then-manager of the Rotary Club.
When he and the club discovered the fraudulent transactions, they confronted the financial institution, which said it had believed the instructions to transfer the money had been genuine.
It later came to the knowledge of the members of the Rotary Club that R3.1m was transferred from Momentum into the bank accounts of unknown persons or entities.
The claim for the repayment of the R3.1m was brought against financial service provider Brough Capital Ltd and its director.
The Rotary Club ceded its claim against Brough to the Lester Connock Commemoration Fund, which was cited at the plaintiff in the application before court.
It is their case that the defendants breached the agreement with the club by not verifying the authenticity of the instructions in each of the five instances that resulted in the total amount paid to unknown entities.
Makume said it was strange that in the emails, ‘Mr Franklin’ talks about ‘my investment’ and not the investment of the Rotary Club.
According to the Pretoria News report, Franklin noted that the withdrawals followed an unusual pattern in respect of the amounts and the regularity. For instance, in a space of two days, R500 000 had been withdrawn and thereafter, two amounts of R1m each.
Franklin said that was unusual and not how he, during his lifetime, communicated withdrawal instructions to the financial institution.
‘The fact that the bank letter did not describe the Rotary Club in full, second, that it was unusual for the Rotary Club to make large withdrawals at short notice, should have raised eyebrows to a vigilant intermediary,’ the judge said.
The defendants were ordered to pay back the R3.1m, with interest.
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
