Banks have a duty to monitor customers’ accounts and
where necessary, step in to protect them from fraud.
The couple, Mr and Mrs W, found an investment online that promised high returns, paid quarterly. After completing paperwork to open the new investment account, they went to their HSBC branch and requested money be transferred from their savings account.
Alarm bells started ringing when the second quarterly payment didn’t arrive from the investment. After trying to contact the investment company, without success, the couple contacted HSBC to report the scam and asked them to help get their money back.
HSBC carried out an investigation but failed to get any response from the bank that the couple’s money had been transferred to. Given that Mr and Mrs W had authorised the transfer themselves, HSBC said there was nothing more that they could do to help. They did offer the couple £100 compensation for a delay in carrying out their investigations.
Mr and Mrs W contacted the Financial Ombudsman Service (FOS) about how HSBC handled their complaint. FOS is a Government backed independent body aimed at resolving disputes between financial businesses and their customers. FOS investigated Mr and Mrs W’s case and concluded that HSBC should have been more proactive in protecting the couple from the risk of financial harm and, in turn, should refund their money.
FOS makes decisions based on what is ‘fair and reasonable’. In the case of Mr and Mrs W, they concluded that HSBC should have monitored money going in and out of the couple’s account, with particular regard to things like money laundering, fraud and scams. Given their experience and expertise, banks are expected to have systems in place to identify and question unusual transactions, and to delay or block any that might be fraudulent.
Scammers are finding increasingly sophisticated ways to trick people out of their hard-earned cash – fraud and scams are, unfortunately, on the rise. Authorised Push Payment (APP) Fraud happens when people are tricked into making a payment from their bank account into the scammer’s account. The money is usually moved on quickly to another account, often overseas, meaning that it is difficult to trace and recover.
Traditionally, banks would not take any responsibility for push payments authorised by customers themselves. But things are changing – FOS has made a number of recent decisions, which highlight the responsibility of a bank to take additional steps, before processing a payment, to check that customers are not at risk of fraud.
Banks have the power to delay or decline payments to protect their customers. HSBC had asked the couple about the purpose of their payment and seemed happy that they had done their research into the investment. But FOS disagreed and thought it was ‘fair and reasonable’ that HSBC should have asked more probing questions given the apparent ‘red flags’.
The payment was for a large amount, was unusual and out of character. The couple had not made any other similar transactions in the previous 6-month period. Further, the receiving bank account was held overseas, and the couple had never transferred money to it before. It also turned out that the investment company was not regulated by City watchdog, the Financial Conduct Authority (FCA).
FOS was not satisfied that HSBC made sufficient checks to ensure that Mr and Mrs W would be safe from fraud or scams. They also concluded that the couple should not bear any responsibility for their financial loss, as the scam was sophisticated, and they were inexperienced investors. FOS ruled that HSBC should refund the couple’s money, plus interest at 8% for the period of time they were without their money.
In reaching his decision the Ombudsman said:
“…given the size of this payment and how unusual it was, I think in these circumstances it would be reasonable to expect these checks to include questions about what research Mr and Mrs W had done, whether they’d used the investment company before and whether they’d checked if the investment company was FCA authorised. And, based on the evidence I’ve seen, I’m not satisfied HSBC asked questions like these. And so I’m not satisfied it took sufficient steps to check whether Mr and Mrs W were potentially at risk from the payment.”
In Mr and Mrs W’s case, they had been encouraged to pay into a non-FCA regulated investment company.
There are many examples of such investments that the Financial Mis-selling team at TLW Solicitors see regularly, including:
- Off-plan property – often abroad, such as hotel developments
- Storage pods
- Carbon credits
- Green oil
- Car parking spaces
- Listed building development projects
Commenting on the FOS decision, Head of Professional Negligence at TLW, Sarah Spruce, said:
“Our specialist team are seeing increasingly elaborate and convincing scams. On the basis that the banks deal with these day to day, they are in the best position to look out for ‘red flags’ and in turn protect their customers.
People affected by fraud in this way are often embarrassed about being the victim of a scam. However, as this case shows, there are avenues of redress. The team and I would urge anyone who has lost money in this way to get in touch. We can advise you about seeking a refund and help you through the process of making a claim for compensation.”
We have a dedicated Authorised Push Payment (APP) Fraud compensation team. We have many years’ experience in helping clients take their complaints to FOS and successfully claiming compensation. We understand the time limits and processes to be followed and that claims can involve complex legal arguments. We have also had success for clients whose cases have been rejected previously.
If you, a friend or a relative has been conned into making payments into a fraudulent investment or scammer, please get in touch for a confidential, no obligation conversation. Call us on 0800 169 5925, email email@example.com or complete one of the forms below.
Time limits can apply and so anyone wishing to bring a claim should do so without delay.
Meet Sarah, who heads up our experienced Fraud and Scam Claims team.
Sarah and her colleagues are on hand to help with your claim.
FOS ruled that HSBC should refund the couple’s money, plus interest at 8% for the period of time they were without their money.