How Canadian Courts Have Ruled on Liability in Wire Transfer Fraud

  • September 26, 2023
  • Mavra Choudhry, Molly Reynolds, Julie Himo, Nic Wall

Redirecting bank wire transfers has become an increasingly common method of fraud, frequently perpetuated through hacking or otherwise impersonating individuals representing a business. In the aftermath, there is often dispute about who bears responsibility for the financial loss: the company that mistakenly sent funds to the wrong bank, or the company whose email was hacked.

The law on liability in wire transfer fraud is developing, with Ontario and Québec seeing particular activity in the courts. Companies are increasingly being held liable where they are found to have failed to act prudently in detecting and preventing the fraud in question. Businesses should accordingly bolster their fraud detection and prevention practices to mitigate litigation risk. Financial institutions in particular should ensure that their practices meet a reasonable standard of diligence.