Title: Bulgarian Court Orders Local Bank to Pay Compensation in Multimillion-Euro Financial Fraud Case

Background

In a landmark ruling, the Sofia City Court ordered Bulgarian bank “Ю. Б. Б. АD” to compensate a North American subsidiary of a multinational industrial and technology group for damages arising from non-compliance with EU and national laws regarding funds transfer, money laundering, and payment services.

Asset Recovery: A Sophisticated Fraud Scheme

• The victim, represented by Mikov&Attorneys, fell prey to an intricate criminal fraud involving undisclosed organized participants from various countries.
• The fraudsters Coerced the victim into transferring large sums to their Bulgarian bank account.
• The tainted funds were dispensed to third parties, significantly reducing the client’s ability to recover their losses.

Tort Liability and Payment Services Provider

• Under Bulgarian law, everyone is responsible for remedying the wrongful damage they inflict on another.
• As a payment services provider, the bank was obligated to comply with Bulgarian and European laws, such as:
  • Regulation (EU) 2015/847
  • Directive (EU) 2015/849
  • Law on Payment Services and Payment Systems
  • Law on Measures against Money Laundering

Question of Liability: Bank’s Obligations and Negligence

• Given the victim’s losses that could not be recuperated from the fraudsters, can the bank be held accountable for its role in the damages?
• The bank was expected to fulfill the following obligations:
  • Investigate any inconsistencies in the payment order and execute the respective actions as mandated by Bulgarian and European laws and internal rules.
  • Implement robust procedures to detect missing payee information (real name, IBAN), and verify that information.
  • Adopt risk-based procedures to determine whether to execute, reject, or suspend a funds transfer lacking complete payer and payee information and follow-up accordingly.
  • Prevent the outgoing transfer from the scammer’s account after receiving explicit notification from the client’s bank and an indemnity letter.

Judgment: Failure to Fulfill Obligations and Liability

• The judge determined that the bank had not lived up to its obligations, causing the damages to the victim.
• The bank should have treated the transfer with the necessary caution and taken the required action to prevent the damages.
• The causal link between the bank’s wrongful actions and the victim’s losses meant that the bank was responsible for paying the awarded compensation to the client.

Anticipated Challenges

• The anticipation is that the bank will challenge this ruling in the second instance court.