Caught Between Disclosure for Justice and Customer Confidentiality – The Role of Banks in Cyber Fraud
We read news about cyber fraud much often than we did a decade ago. With the advancement of online bank transfer, a simple click on your smart phone enables instant transfer of monies. A common pattern we observe is fraudsters taking advantage of this technological development to easily access email accounts or instant communications and alter transferee information.
If you unfortunately fall victim to cyber fraud, a direct recourse is to commence a lawsuit against the wrongdoer, obtain injunction to freeze the assets in the fraudster’s account and undertake necessary actions to recover your money lost. However, what if you have no knowledge of who the fraudster is? Does it mean that you run out of chances to recover your money?
Norwich Pharmacal Order and Gagging Order
If your communication is intercepted, and you are instructed to transfer money to a fraudulent bank account without any further information, you would not be able to commence any lawsuit against the fraudster because his/her identity is unknown.
In this case, the law helpfully assists you by a Norwich Pharmacal Order and a Gagging Order (collectively “Orders”). In short, a Norwich Pharmacal Order is a duty imposed by the court on a person, where through no fault of his/her own, gets mixed up with wrongdoings of another person, and assists the victim by giving information and identity of the wrongdoer. A Gagging Order, on the other hand, restricts one from disclosing to any third party the existence of the court proceedings.
In the above case, you may apply for a Norwich Pharmacal Order against the relevant bank to obtain necessary information to identify the wrongdoer, for example his/her account opening information, for you to identify the name and service address of the defendant. You can also obtain information to preserve or discover assets which are important for tracing of funds if needed. The Gagging Order is used to withhold the bank from disclosing information about the court proceedings to a third party, including the wrongdoer, which essentially overrides the bank’s duty to its customer to inform existing proceedings.
With these two helpful Orders, can you apply for them together so you can identify the wrongdoer with the help of the bank with minimal costs and time? The answer is no. In a decision of A v B  HKDC 833 recently published on 11 August 2022, Deputy District Judge Teresa Wu reminds the party seeking help from the bank via the Orders to follow the steps outlined by Deputy High Court Judge Maurellet SC in Asiya Asset Management (Cayman) Limited v Dipper Trading Co., Limited  HKCFI 1090.
The proper procedure to be taken should be a 2-step approach: –
The reason for a 2-step approach arises from addressing the bank’s dilemma between an overriding duty to its customers and the duty to assist a victim.
As briefly explained above, these Orders request the bank to both provide information to identify the wrongdoer and refrain from disclosing to anyone the existence of the proceeding (including the wrongdoer). If you were the bank, you were served and made aware of an intended application for the Orders but at the same time, your customer came to you and requested for operation of his account, how should you do? If you operated the account for your customer, were you knowingly assisting the wrongdoer?
The 2-step approach resolves the dilemma and releases the bank from the difficult situation. The victim will be protected under the Gagging Order and the bank who is put on notice can have sufficient time to come forward and make submission (if any) under step 2 to safeguard its customer’s interest. When the Norwich Pharmacal Order is granted under step 2, the Gagging Order can also protect the victim while the bank takes time to prepare the information requested by the victim. Therefore, these steps helpfully balance the interests of both parties as they will all be given chances to be heard.
With the spike in cybercrime cases, we understand the victim’s concern and urgency to recover monies, but at the same time, one should also keep in mind the proper procedure to follow regarding court applications and the court’s duty to safeguard all parties’ interests, which cannot be avoided in the name of convenience. If you unfortunately fall victim to cyber fraud, we strongly advise that you report the matter to the Police Force and seek legal advice at your earliest convenience to increase your chances to recover your money lost.
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