Splash the Cash: Santander makes £130m Christmas payment blunder

January 9, 2022


3 min read

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What's going on here?

Santander deposited £130m into 75,000 accounts in error on Christmas Day.

What does this mean?

The deposits were taken from 2,000 of Santander’s corporate clients when out-going payments and payroll were duplicated in error. The timing of the mistake left some clients confused, with employees concerned it was a payroll error on their part. However, Santander has issued a statement stressing that “none of our clients were at any point left out of pocket as a result”. 

The bank is looking to recover the deposits, yet many recipients hold accounts with other banks. The account holder must repay the money, or may face criminal charges if they refuse, despite not being responsible for the error. Under the Theft Act 1968, customers who keep the deposits could be charged with ‘retaining wrongful credit’. This has a maximum sentence of ten years’ imprisonment. You can be criminally charged even if you have already spent the money, and regardless of whether returning the sum would eat into an overdraft. There are two criteria for guilt:

  1. You know the deposit was an error; and
  2. You act dishonestly by not attempting to cancel the deposit or rectify the error.

What's the big picture effect?

In the past three decades, it has become more common for banks to claim restitution for unjust enrichment instead of using the Theft Act 1968. Banks can launch restitution claims when customers refuse to return money deposited in error. Legally, unjust enrichment is when someone profits financially from a transaction that was an error or did not go as intended. Restitution was formally recognised as a distinct equitable doctrine by the House of Lords in Lipkin Gorman v Karpnale Ltd (1991). It typically has four requirements:

  1. That the defendant has been enriched;
  2. That this enrichment was at the claimant’s expense;
  3. That this enrichment at the claimant’s expense was unjust; and
  4. Consideration of whether the defendant has a defence.

Typically, the defendant will be ordered to repay the exact amount of the unjust enrichment to the claimant. 

There are four main categories used to demonstrate that the enrichment was unjust:

  1. The enrichment was a mistake by the claimant;
  2. The claimant was under duress to enrich the defendant; 
  3. The defendant abused their relationship with the claimant to unjustly enrich themselves;
  4. The claimant did not initially want to enrich the defendant, or they did but have since changed their intentions.

Banks making error deposits is uncommon. However, in 2007, a woman from Blackburn mistakenly received £135,000 from Abbey National (now part of Santander). Along with family members, she spent the money on luxury items including a Florida holiday for her child. After the error was discovered she was given a sentence in youth custody for ‘eleven counts of theft and one of retaining wrongful credit.’ Other family members who had received items and cash were also convicted to varying degrees depending on their involvement. 

Banks have now acted to prevent situations where money is deposited in the wrong account due to sender error. In one case, a hairdresser accidentally sent £26,000 of her employee’s wages to the wrong account because of one incorrect digit. The ‘confirmation of payee’ system came into use in 2020 meaning after inputting the account number and sort code, customers from banks such as Barclays and Nationwide should be given the name of the account holder and asked to verify this is who they intend to pay. This is an extra layer of confirmation to prevent sender and manual errors, ensuring money is sent to the correct recipient. 

Whilst bank error payments are infrequent, they are costly to the bank. They are usually due to either bank error, or the sender inputting digits incorrectly. Banks have responded to the latter by increasing the ‘confirmation of payee’ system, and are able to use restitution to recover funds from uncooperative recipients who could be criminally charged for holding onto, or spending, the money.

Report written by Phoebe Turner

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