UAE bank ordered to refund customer after failing to prove he authorised digital payment - Sanadak rules

Abu Dhabi: The banking and insurance disputes settlement unit Sanadak revealed that a local bank was obligated to return an amount deducted from a customer’s account via a digital payment service, after the bank failed to provide evidence proving that the customer’s phone was linked to the service or that he agreed to use it. Sanadak explained in a disclosure that the customer, whom it referred to by the letters B.H., filed a complaint against one of the banks operating in the country, in which he stated that his bank account had been hacked, confirming that he had not received any notifications from the bank on his phone regarding the deduction process. It added that the team investigated the complaint and contacted the customer, and it turned out that the amount was deducted through a digital payment service, while the financial institution concerned was unable to provide evidence proving that the account holder’s phone was linked to this service or that he was authorised to use it. Based on the verification results, Sanadak deemed the transaction unauthorised and obligated the bank to return the deducted amount, based on the rules regulating fraud prevention and financial consumer protection, and the requirements it imposes regarding proof of authorisation in electronic transactions. The unit did not disclose the name of the bank, the amount refunded, or the type of digital payment service used. It also did not clarify whether the incident involved the use of a one-time verification code, or the number of transactions performed on the account. The Consumer Protection Standards issued by the Central Bank of the UAE stipulate that a transaction is considered authorised if the financial institution has applied appropriate and secure verification procedures, unless the consumer provides preliminary evidence that raises reasonable suspicion that he did not carry out the transaction in dispute. The standards require financial institutions to provide 24/7 digital and telephone channels for reporting lost, stolen, or misused accounts or cards, and to take necessary measures to prevent further unauthorised transactions. It also stipulates that unauthorised payments be refunded to the consumer upon completion of the investigation, or within 30 calendar days from the date of notification of the incident or its discovery by the financial institution, whichever is shorter, except in cases where there is evidence of the consumer acting fraudulently or with gross negligence. If the financial institution is unable to confirm and clearly document the client's authorisation for the transaction, and the dispute over liability and the quality of evidence continues, the complaint must be referred to the complaints resolution mechanism. Sanadak unit Sanadak is an independent entity established by the Central Bank of the UAE to settle disputes between consumers and small and medium enterprises on one hand, and financial institutions and licensed insurance companies on the other. Its jurisdiction includes complaints related to bank accounts, credit cards, payment services and loans, in addition to insurance disputes.