diff --git a/htlcswitch/link.go b/htlcswitch/link.go
index 9e9405293..f50cc580d 100644
--- a/htlcswitch/link.go
+++ b/htlcswitch/link.go
@@ -1637,8 +1637,21 @@ func (l *channelLink) handleUpstreamMsg(msg lnwire.Message) {
 				OnionSHA256: msg.ShaOnionBlob,
 			}
 		default:
-			log.Errorf("Unknown failure code: %v", msg.FailureCode)
-			failure = &lnwire.FailTemporaryChannelFailure{}
+			log.Warnf("Unexpected failure code received in "+
+				"UpdateFailMailformedHTLC: %v", msg.FailureCode)
+
+			// We don't just pass back the error we received from
+			// our successor. Otherwise we might report a failure
+			// that penalizes us more than needed. If the onion that
+			// we forwarded was correct, the node should have been
+			// able to send back its own failure. The node did not
+			// send back its own failure, so we assume there was a
+			// problem with the onion and report that back. We reuse
+			// the invalid onion key failure because there is no
+			// specific error for this case.
+			failure = &lnwire.FailInvalidOnionKey{
+				OnionSHA256: msg.ShaOnionBlob,
+			}
 		}
 
 		// With the error parsed, we'll convert the into it's opaque
diff --git a/htlcswitch/switch_test.go b/htlcswitch/switch_test.go
index 6e8a1698d..59f6fae9a 100644
--- a/htlcswitch/switch_test.go
+++ b/htlcswitch/switch_test.go
@@ -2097,8 +2097,8 @@ func TestUpdateFailMalformedHTLCErrorConversion(t *testing.T) {
 
 		fwdingErr := err.(*ForwardingError)
 		failureMsg := fwdingErr.FailureMessage
-		if _, ok := failureMsg.(*lnwire.FailTemporaryChannelFailure); !ok {
-			t.Fatalf("expected temp chan failure instead got: %v",
+		if _, ok := failureMsg.(*lnwire.FailInvalidOnionKey); !ok {
+			t.Fatalf("expected onion failure instead got: %v",
 				fwdingErr.FailureMessage)
 		}
 	}
diff --git a/lntest/itest/lnd_test.go b/lntest/itest/lnd_test.go
index ea0996ab2..751edf02c 100644
--- a/lntest/itest/lnd_test.go
+++ b/lntest/itest/lnd_test.go
@@ -3570,7 +3570,7 @@ func testSphinxReplayPersistence(net *lntest.NetworkHarness, t *harnessTest) {
 
 	// Construct the response we expect after sending a duplicate packet
 	// that fails due to sphinx replay detection.
-	replayErr := "TemporaryChannelFailure"
+	replayErr := "InvalidOnionKey"
 	if !strings.Contains(resp.PaymentError, replayErr) {
 		t.Fatalf("received payment error: %v, expected %v",
 			resp.PaymentError, replayErr)