A Financial Ombudsman Service ruling that a financial institution must reimburse a customer who paid more than A$360,000 to a scam investment company has imposed a new duty of care, according to a leading banking lawyer. Customers have to be protected from known fraudsters.The customer made 21 credit card payments over a two-week period in April and May 2015 to a company that represented itself as a trader in sophisticated financial products.The Australian Securities and Investments Commission had notified the industry of the scam. According to FOS, under the Code of Banking Practice, the financial institution was obliged to implement processes to avoid customer fraud.The financial institution put in place a process to detect payments but its sanctions screening database did not cover credit card payments. Also, the company name ASIC provided and the merchant name on the payments were slightly different.The customer said the financial institution should have warned him about the scam, should not have allowed the transfers and should have charged back the transactions.The financial institution said it should not be obliged to detect the payments going to a merchant name different from that contained in the ASIC advice.FOS rejected this, saying the merchant name and the company name mentioned in the ASIC advice were not materially different and should still have been detected and blocked.It also said there were a large number of payments and the financial institution should have detected their ultimate destination after a few were made.The financial institution was ordered to pay the customer $235,000. FOS said the customer shared some responsibility for the loss due to his failure to protect his own interests.Corrs Chambers Westgarth partner Michael Chaaya and special counsel Peter Anderson issued a review of the case saying: "The determination now means that banks owe customers a duty to prevent them suffering a loss to known fraudsters."Chaaya and Anderson said: "Courts have been willing to impose a duty of care on banks where they are providing detailed transactional advice as an adviser. In this case, FOS is imposing such a duty in respect of protecting customers from all known fraud in all cases."They said the ruling should not be seen as applying only to ASIC warnings."The key fact in the [ruling] was that the bank had been put on notice of the exact fraud for which the customer suffered a loss. That appears to be an extremely high burden to place on banks," they said.