HSBC Customer Duped by Fake Celebrity Endorsement Successfully Claims Compensation

A common tactic deployed by investment scammers is to apply pressure to invest more money, even if your initial investment value has fallen. After three payments (each less than £5000) made using his debit card, Mr M was persuaded to transfer a total of £90,000 by bill payment – the same month – and over £145,000 by international transfer over the next six months or so, all from his HSBC bank account.

Mr M became suspicious about the investment and Interabroker and made a complaint with HSBC.

HSBC was unable to recover the initial payments Mr M had made by debit card, as the time limit imposed by the chargeback scheme had passed. Even though Mr M accepted he had authorised the payments from his HSBC account, he was unhappy that the bank did not do more to prevent the scam from taking place. He took his complaint to the Financial Ombudsman Service (FOS), the UK’s financial dispute resolution service.

APP fraud is, disappointingly, on the rise, with over £485 million reportedly lost to scams in 2022. APP Fraud victims are tricked into sending money to a fraudster, in the belief that they are investing in a genuine product or sending money to a trusted professional. There are many different types of APP fraud scams – Mr M was the victim of an investment scam. Other scams include crypto scams, romance scams and impersonation scams.

The starting point of the investigation by the Financial Ombudsman Service was that whilst Mr M had authorised the payments to Interabroker, it also to examine what his bank could have done to protect him and his money.

There have been a number of important decisions from FOS about banks’ responsibilities to their customers, particularly in relation to preventing scams from happening in the first place. As heavily regulated financial industry experts, Banks have a duty of care to monitor customers’ accounts, to ask more questions about the purpose of a pending payment, and in turn, they have powers to delay or even block payments they believe to be of concern.

The Ombudsman looked at payments leaving Mr M’s account in the 12-month period before the scam payments were made. While there were a number of large payments, all were obviously attributable, for example, a house purchase, a new car, and double glazing. However, there was no history or pattern of paying new payees large amounts more than once on the same day. The payments to the scammer should therefore have raised a red flag at the bank. Two more payments went through two days later, to the same payee, and the bank did not think it was out of character or step in to ask more questions.

The Ombudsman commented that, had HSBC stepped in at that point, they would likely have uncovered the possibility of a scam and been able to warn Mr M about the payments he was making. The Ombudsman also commented that Mr M could not have reasonably known that he was investing in a scam or that the trading balance he was able to see on his investment account was likely to be fake. Scammers often use simulation accounts, which look like real trading accounts, but don’t actually trade in real money. They simply take the money and run.

Following FOS’ investigation, HSBC was ordered to refund Mr M in full, plus 8% interest. The Ombudsman was clear in pointing out that, at the time Mr M was scammed, the City watchdog, the Financial Conduct Authority (FCA), had already issued warnings about scams of this type and HSBC should have had measures in place to step in and protect Mr M’s money.