Legal Accountability In Payment Fraud
1. United States v. Cardona (2017) – Credit Card Fraud
Background
Cardona was involved in a credit card cloning and skimming operation.
Fraudulent transactions totaled over $1 million across multiple banks.
Legal Issues
Unauthorized use of payment instruments
Wire fraud under 18 U.S.C. § 1343
Criminal liability for financial intermediaries if negligent
Case Law Outcome
Court held that Cardona was personally liable for both criminal and restitution penalties.
Established that intent to defraud and knowingly using stolen card data triggers both federal and civil liability.
Importance
Reinforced accountability for individual perpetrators in electronic payment fraud.
Highlighted the role of banks in monitoring unusual transaction patterns to prevent complicity.
2. Shreya Singhal v. Union of India (2015) – Online Payment Fraud & Liability of Intermediaries
(Not fraud directly, but establishes intermediary responsibility for online content affecting payments.)
Background
Though the case was about freedom of speech, its principle was later applied to intermediary liability in financial fraud online.
Legal Principle
Payment platforms can be held liable for third-party fraudulent activity if they do not act expeditiously to block fraudulent transactions once notified.
Supports Section 79 of the IT Act, 2000 in India: intermediaries are exempt from liability unless negligence is proven.
Importance
Foundation for liability of payment gateways and fintech companies in India.
3. In re Equifax, Inc. Customer Data Security Breach Litigation (2019)
Background
Equifax’s breach exposed credit card numbers and personal data of 147 million people.
Fraudsters used the stolen data for unauthorized transactions.
Legal Issues
Negligence in protecting financial and personal information
Breach of consumer protection laws and state data security statutes
Case Law Outcome
Court approved a $700 million settlement: $425 million for consumers and $275 million for credit monitoring and security improvements.
Established corporate liability for failure to prevent fraud via negligence in data security.
Importance
Reinforces that corporations are accountable for enabling payment fraud indirectly through inadequate IT and data security.
4. United States v. Aziz (2016) – Online Payment Gateway Fraud
Background
Aziz operated a fraudulent online payment gateway accepting credit card payments for non-existent goods.
Thousands of consumers lost money.
Legal Issues
Mail and wire fraud
Money laundering
Criminal conspiracy
Case Law Outcome
Convicted under 18 U.S.C. § 1343 and 18 U.S.C. § 1956
Sentenced to 10 years imprisonment and ordered full restitution
Court emphasized both operators and facilitators can be held accountable.
Importance
Highlights that payment processing companies can face legal scrutiny if knowingly or negligently facilitating fraud.
5. Standard Chartered Bank v. Pakistan National Shipping Corporation (PNC) (2003) – Unauthorized Transaction Liability
Background
PNC claimed unauthorized electronic fund transfers facilitated by Standard Chartered Bank.
Legal Issues
Liability of banks for processing transactions without proper authentication
Duty of care in electronic funds transfer (EFT) systems
Case Law Outcome
Court held the bank liable for failing to implement adequate safeguards, even if PNC did not detect fraud promptly.
Introduced the principle of strict liability for financial institutions in electronic payments.
Importance
A cornerstone case for payment fraud accountability of banks.
6. State Bank of India v. Vikas Bansal (2009) – ATM Card Fraud
Background
Fraudster cloned SBI ATM cards and withdrew large sums from multiple accounts.
Legal Issues
Negligence in ATM security and monitoring systems
Individual liability of perpetrators
Case Law Outcome
Court held the fraudster personally liable
Bank also compensated victims for negligence in monitoring unusual ATM withdrawals
Reinforced shared liability between fraudsters and financial institutions failing security protocols.
7. PayPal Fraud Dispute – Doe v. PayPal (2014)
Background
Customer alleged unauthorized withdrawals and disputed payments processed via PayPal.
Legal Issues
Liability of online payment processors for failing to prevent fraudulent charges
Terms of service and negligence in monitoring
Case Law Outcome
Court ruled PayPal had limited liability under its user agreement, but negligence could be actionable if they ignored repeated fraud alerts.
Set a precedent for fintech accountability in fraud detection and response.
Summary Table
| Case | Fraud Type | Accountability | Legal Principle |
|---|---|---|---|
| US v. Cardona (2017) | Credit card skimming | Individual criminal & restitution | Wire fraud liability |
| Shreya Singhal v. Union of India (2015) | Online intermediary liability | Payment platforms | Intermediary negligence triggers liability |
| In re Equifax (2019) | Data breach leading to fraud | Corporate liability | Negligence in data security |
| US v. Aziz (2016) | Payment gateway scam | Operators & facilitators | Wire fraud & money laundering |
| Standard Chartered v. PNC (2003) | Unauthorized fund transfers | Bank liability | Duty of care in EFT systems |
| SBI v. Vikas Bansal (2009) | ATM card cloning | Shared liability | Bank & perpetrator accountability |
| Doe v. PayPal (2014) | Online payments | Fintech platform | Negligence in fraud monitoring |
Key Legal Principles Across Cases
Intentional fraud triggers criminal and civil liability (wire fraud, money laundering, theft).
Financial institutions are liable for negligence in payment monitoring, security protocols, and timely detection.
Intermediaries (gateways, fintech platforms) have conditional liability, especially if they ignore repeated fraud alerts.
Data breaches enabling payment fraud establish corporate liability, even indirectly.
Shared liability can occur when both the perpetrator and service providers fail in their respective duties.
RELATED Blog
{!! (isset($postDetail['review_mapping']) && count($postDetail['review_mapping']) > 0 ? count($postDetail['review_mapping']) : 0) }} comments