QUESTIONS
We sometimes report unusual transfers of deposits and payments to FinCEN when they are not typical for the account holder. However, every once in a while, we have to prevent wire transfers if we believe there is fraud or other potentially criminal activity.
Our concern is not only about the filing of the SAR. Sometimes we don’t. Recently, we got a complaint from the account holder because we stopped the transfer due to issues involving the unusual payments going out of the account. He has retained a lawyer and threatened us with a lawsuit.
Eventually, we resolved the situation. But that leaves open the possibility of being sued again by somebody else for the same efforts we have made to protect the account holder. We’re protecting their interests! It feels like we’re damned if we do and damned if we don’t.
What happens if we were right all along in protecting the account holder?
ANSWER
It was in early 2018 that Patricia O’Rourke, a recently divorced 64-year-old who had banked with PNC for many years, enrolled with the online dating service “Plenty of Fish.” In this dating service, she began to cultivate a virtual relationship with an individual identifying himself as “William Riccardo.” Riccardo represented to O’Rourke that he was a doctor in the military stationed in Afghanistan and would be returning to the United States for good following the end of his mission.
After gaining O’Rourke’s trust, Riccardo told her that he acquired five million dollars worth of “gifts” while in Afghanistan but was having trouble facilitating their transfer to the U.S. because of the sudden death of the lawyer who handled all of his financial interests. At this point, Riccardo began soliciting monetary transfers from O’Rourke under the guise of eventually freeing up the alleged five million dollars of “gifts.”
She trusted him and agreed to help. Soon thereafter, she received one request after another from him for funds needed to transfer the package. At Riccardo’s request and direction, O’Rourke paid various persons and companies. The payments totaled $246,600. Of that sum, $75,000 was transferred through PNC Bank.
O’Rourke alleged that she tried on three separate occasions to wire funds from her PNC account, but each time the bank suspected she was “being abused by someone committing a fraud upon her” and declined to wire the funds. But after these refusals, the bank let O’Rourke draw a cashier’s check in the same amount she had sought to wire on those previous occasions.
The drawing of the cashier’s check was the basis of her negligence claim against PNC. O’Rourke alleged that PNC’s refusals to wire funds from her account demonstrated the bank knew that she was being defrauded and had a duty to investigate and warn her.
Thus, the lawsuit O’Rourke v. PNC Bank[i], a Delaware case. In her suit, plaintiff O’Rourke alleged PNC violated “the Banking Law and Regulations,” specifically, the Bank Secrecy Act” (BSA). PNC had not filed a Suspicious Activity Report (SAR). PNC responded by filing a Motion to Dismiss the Complaint, arguing that the BSA does not provide the plaintiff a private right of action. In response, O’Rourke then filed a First Amended Complaint; however, the only difference between the Complaint and the First Amended Complaint was an alteration to the only count in which PNC was implicated, to wit, a substituted negligence claim for the failed BSA claim. PNC moved to dismiss that case.
O’Rourke argued that PNC “provides a government related service to individuals and at all times it owes to those individuals it serves a duty of reasonable care,” which includes the obligation to take reasonable care when making payments from her account. She also asserted that, as a result of the bank’s knowledge of her banking history, practices, and its awareness of the types of fraud persons such as she was subjected to, once PNC acquired a reasonable suspicion that her requested wire transfers were for a fraudulent purpose, the bank owed her a duty to protect her from the malicious third party, which it failed to do. That’s quite an assertion, is it not?
Specifically, she said that her negligence claim was premised on “the legal principle that when a party knows another is being abused, it cannot stand idly by and allow the abuse to occur and it certainly cannot aid the abuser, as PNC did here, by facilitating the withdrawal of her funds.” (sic)
O’Rourke did not cite any authority supporting this purported “legal principle,” Judge Jan R. Jurden said. O’Rourke also alleged that, as a regulated banking entity, PNC had a duty to “follow Federal mandates designed to protect its depositors from the type of exploitation suffered by O’Rourke.
PNC argued that the negligence claim was nothing more than an attempt to recast O’Rourke’s abandoned BSA claim. As such, it failed to state a claim because the BSA does not establish a standard of care.
PNC maintained that O’Rourke fails to cite any cases that support the proposition that a bank can be held liable in negligence where the customer has fallen victim to a scam. The bank also asserted that, under Delaware law, a bank’s duty of care is preempted by the Uniform Commercial Code. And, even if the UCC did not preempt a common law negligence claim, the duty owed by PNC to O’Rourke was defined by her customer agreement. PNC contended that the customer agreement imposes no “duty to warn” on PNC. In point of fact, it expressly permits O’Rourke to withdraw her funds freely and states that it is O’Rourke’s “duty and responsibility to maintain [her account. . .”].
The judge wrote in the Court’s opinion that the issue was whether PNC owed O’Rourke a duty to investigate and thwart a “romance scheme” to which she fell victim. Barred from asserting her original BSA claim, O’Rourke then recast her claim as a common law negligence claim. The elements of a common law negligence claim are duty, breach, causation, and harm. The judge opined that if any one of these elements is missing, the claim cannot succeed.
So, it seems quite clear that O’Rourke has not and cannot, based on the law, establish that the bank owed her a duty to stop her from drawing money from her account. The judge held that O’Rourke made numerous, uncited references to general duties (i.e., the “duty to warn” and “the legal principle that when a party knows another is being abused, it cannot stand idly by and allow the abuse to occur”) but failed to assert a cognizable legal duty applicable to PNC under the facts.
Or, to put a fine point on it, quoting the judge: “While O’Rourke tries mightily to save her claim, she cannot.”
As pleaded, the bank’s purported liability to her was still based upon the BSA and PNC’s alleged failure to file a Suspicious Activity Report. In the absence of viable allegations of an applicable duty of care, the plaintiff’s negligence claim against PNC could not survive. As a result, PNC Bank’s Motion to Dismiss the plaintiff Amended Complaint was granted.
The court dismissed O’Rourke’s negligence action against the bank because the customer had not and could not establish that the bank owed her a duty to stop her from drawing money from her account.
Chairman & Managing Director
[i] O’Rourke v. PNC Bank, 2022 Del. Super. (Del. Sup. Ct. February 15, 2022)
