What happens if my cash goes astray?

lost money

What would happen if I made an online transfer but the money didn't arrive in the other account?

In the age of online banking, transferring money between accounts is as simple and everyday as paying in a shop.

Which makes it all the more troubling that, sometimes, bank transfers can go wrong.

When transfers go wrong

Wrong sort code or account number

Human error is an inevitable part of life - and is especially prevalent when we're required to type in meaningless strings of numbers, such as sort codes and account numbers.

If we mistakenly enter a wrong digit, then the money could go to the wrong party.

If this is the case, we need to contact our own bank as soon as possible. They can't stop a payment that's already been made, but most will act on our behalf in trying to track it down and recover it.

Bank error

Even if the sort code and account number have been entered correctly, a bank error could result in the transfer not being made.

In that case, the first step is to ask the sending bank to provide evidence that they have made the transfer.

If the bank can show that they did indeed make the payment, then they should also carry out an investigation and try to recover the missing money.

Recovering incorrect transfers

However it happens, when an incorrect transfer has been made, reporting the error is the first order of business.

While the money still legally belongs to the person making the payment (see below), there are plenty of stories attesting to the fact that recovering it often isn't easy or guaranteed.

The good news is that since May 2014, there's been a much clearer procedure for the banks to follow - and in early 2016 the guidelines were bolstered even more in the customer's favour.

The procedure is contained in Payments UK's "voluntary code of best practice on misdirected payments". Although the code is voluntary, and only 15 banks have signed up to it, they include all the big high street names.

As soon as we let our bank know we've made a mistake with a payment - whether it's just after we hit "send" or some time later - the guidelines state that they have two working days to act.

This usually means getting in touch with the receiving bank to see what's happened - and since January 2016, if there's clear evidence of a genuine mistake, our bank will also ask them to make sure the money isn't spent by mistake.

The receiving bank will then contact the person whose account stands to gain from the error, to give them the chance to dispute that the payment was made by mistake.

Frightening as this may sound - we're relying on a stranger to be honest - most claims are undisputed, and the money should be returned to us within 20 working days.

There's more on what to do when it's us who receives money in error below.

When there's a dispute

Problems with recovery typically arise when the owner of the receiving account disputes the claim. In some cases this is deliberate, while in others it's because they're unaware of a problem - say, if the account is unused for some reason.

Before the introduction of the misdirected payments code, there were no hard and fast rules for the banks to follow.

Now, however, if the bank can't reclaim the funds straight away, they must launch an investigation and report back to the person who made the payment within 20 days.

The bank must also let us know about the options available to us should it look like they can't recover the money.

In some cases this won't be as bad as it sounds. Banks investigating payments made in error aren't supposed to be able to remove disputed funds from an account if it would put the recipient into unauthorised overdraft, for example.

Unfortunately, that remains the case if the reason the recipient would go into overdraft is because they knew the money wasn't theirs but spent it anyway.

In cases such as these, one of the options available to us is taking the recipient to court.

How to prevent transfer disasters

As so often in life, prevention is better than cure.

Check the recipient details

Be aware that for transfers between accounts based in the UK, names are irrelevant - it doesn't matter whether we include one or not, and whether the name on the receiving account matches the one we provide.

The Faster Payments website emphasises this:

"It's vital to double check the sort code and account number before sending a payment: payments are processed only using these numbers".

Payments UK therefore advise anyone making a transfer to double and triple check the recipient's sort code and account number before hitting "send" - and they provide a sort code checker to help with the first part.

It can't tell if a sort code is for the "right" account (i.e. it can't give any details about the name of the account holder, or of the account itself) but it can confirm whether the account is suitable for the type of transfer.

sortcode checker

We should also check the amount, and make sure to include a payment reference if one is required - this is often found when making payments to utility companies.

For payments from one person to another - say to a friend - it can worthwhile making a much smaller "test payment" of £1 or less before transferring the full amount.

As well as making sure the details are correct, it'll give both parties a feel for how long it'll take - and if something goes wrong, it's much less traumatic.

International transfers

The good news is that when it comes to making an international transfer, we're often required to provide far more than an easily mangled string of numbers.

Institutions in countries that use the International Bank Account Number (IBAN) system - which include most European nations - can carry out transfers with just the numerical information.

Because of the way IBAN works, our money is far less likely to be swallowed by the wrong account and far more likely to bounce back to us - letting us know something has gone wrong somewhere.

However, some UK banks - including Lloyds, HSBC, and Barclays - will only permit international transfers to be carried out when we provide the full name and address of the recipient, even if they're in a country that uses IBAN.

Furthermore, anti-money laundering laws in the US and some other countries mean that we need to be able to provide as much detail as possible about the recipient, and get it all right, before the payment can go ahead.

Recovering from disaster

When it comes to dealing with UK banks and building societies, the key is to cite the misdirected payments code.

That's because the terms and conditions provided by many banks contain sentences like this, from Lloyds and TSB - who are both signed up to the code:

"If a payment does go to the wrong person because you gave us the wrong details, we will use reasonable efforts to recover the payment and, if we manage to do so, we may charge you our reasonable costs."

By citing the code, we're effectively telling our bank that we expect them to follow best practice when trying to recover our money - and if they don't live up to that expectation, we're entitled to complain.

If we do then feel the need to make a complaint, we should first do so according to the bank's own formal written complaints procedure, which should be available upon request. Should that not work, the next step is the Financial Ombudsman.

If you receive money in error

It may hearten those who make payment errors to know that unintended recipients of their money aren't entitled to go on a spending spree.

According to a spokesperson from Payments UK, which oversees the payments system, "if they use that money, essentially they are committing theft".

The law is indeed pretty clear on the matter.

Under the 1968 Theft Act, "a person is guilty of an offence if: a wrongful credit has been made to an account kept by him... or he knows or believes that the credit is wrongful; and he dishonestly fails to take such steps as are reasonable in the circumstances to secure that the credit is cancelled."

Treating a bank error as a lottery win is obviously unlawful - in 2008, a woman from Blackburn was prosecuted after spending an £135,000 accidental deposit from the then Abbey National - but most incorrect payments aren't quite so noticeable.

As noted above, the bank is entitled to recover the money, so should our balance be healthier than we expect it's worth taking a good look at the "money in" column on our statements.

Anyone who receives money and can't account for its provenance should inform their bank; if there's the suspicion that it's been sent in error, set the money aside until any doubt has been cleared up.

Comments

1
15 June 2016
manda

Hi, just wondered if anyone can help, I'm waiting for an international payment it was bank transferred last monday (6th june) and was told it would take 3-5 days it's now 15th june and I've still not received it I'm talking to the manager of the company who sent it and he's waiting for confirmation from his bank, I rang my bank and spoke to international payments and there's no record of a payment coming in, the manager has sent me confirmation of the bank transfer being made does anyone know where it could be or why this has happened??

2
7 June 2016
Përparim Kryeziu

@Chooseteam; I have made a bank transfere from Portugal to Germany (Deutch bank). Unfortunately I am afraid I put the wrong name, but I am 100% sure that I have put the correct IBAN. It has been past one week and the money is not there yet. If there was a miss match of name of recipient and IBAN shouldn't have the money returned back to me?! My bank in portugal says that they have done everything on their part. Do you have advice, or any idea what could have happened?

Thank you very much in advance.

3
6 June 2016
carley

Transferred money from Barclay's account to an online account (cashplus ) because this online bank has a limit they wouldn't put it in my online account they phoned me and transferred it back to Barclays 2 days later. 3 weeks on the money isn't in either accounts and no one is taking ownership for my missing 1500 pounds... can anyone recommend what to do next thanks.

4
10 September 2015
Mike Breen

"Be aware that account names are irrelevant to whether an transfer will be made successfully."
Not true. Transfers can be and are bounced because the name does not match that of the account holder.

6 October 2015
Choose team

Hi Mike, thanks for your comment.

The situation in the UK is that banks only need the numerical data - the sort code and account number - to process a transaction. The <a href="http://www.fasterpayments.org.uk/consumers/misdirected-payments" rel="nofollow noopener">Faster Payments website</a> advises people to this effect: "It's vital to double check the sort code and account number before sending a payment: payments are processed only using these numbers".

Where it can differ is in the case of international transfers. From what we can make out, countries that use the IBAN (International Bank Account Number) system - including most, but not all, European countries - again only need the numerical information. Because of the way IBAN works, bounced payments are much more likely than payments that get swallowed into another account.

In countries that don't use IBAN, like the US, including the name - and getting it right - is more important, if not mandatory. US anti-fraud guidelines make much of checking the beneficiary's name to help prevent money laundering. But in the UK, it's the numbers that count.

We'll update the guide to make this information that bit clearer.

9 October 2015
Mike Breen

From my PC banking and backed by two transfers being returned from Germany at my cost when the name on the transfer did not match the name of the account.

"As part of our Anti Money Laundering Policy you are required to state the name and address of your beneficiary when issuing international payments. For European payments (in euros) only the beneficiary name is required.
Not providing these data can result in payment refusal."

14 October 2015
Choose team

We've checked with several banks and money transfer services for you - and it does depend on who's doing the transfer and where it's going to.

For example, Halifax are happy to carry out an international transfer to countries that use IBAN - which includes Germany - with just the BIC/SWIFT code and IBAN data, that's the numerical information alone. But when transferring payment to countries that don't use IBAN, they do also ask for the recipient's name and address.

However, Lloyds and Barclays - among others - do also ask for name and address information for all international transfers, even those using IBAN. This is down to their individual anti-money laundering policies.

5
28 November 2013
christine andrews

We have just sold a property in Spain. The proceeds were transferred to the wrong account. The bank paid the money to the estate agent's account who sold the property but with our name on the document. When the money was presented to the estate agent's bank, they rejected it because the name was wrong. We have been told that this money was sent back to the estate agent's head office in Barcelona and now we have to wait for them to send it back to the original bank before they can forward it to us.
Does this sound feasible?

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