Upheld: Fraud reimbursement (APP scams) complaint against Caxton Payments Limited
Financial Ombudsman decision DRN-4278942 of 2023-09-18T00:00:00+00:00. Fraud reimbursement (APP scams) complaint against Caxton Payments Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-4278942 |
|---|---|
| Decision date | 2023-09-18T00:00:00+00:00 |
| Firm | Caxton Payments Limited |
| Product | Other regulated product |
| Claim type | Fraud reimbursement (APP scams) |
| Outcome | Upheld |
| Remedy | Caxton Payments Limited must: (1) Refund $33,000 to U's account; (2) Refund any fees or charges associated with the payment; (3) Add 8% simple interest from the date the payment was made until the date of settlement |
Summary
U complained that Caxton Payments Limited was holding it liable for a $33,000 payment that was diverted to a fraudster's account due to email interception. Mr L had authorised the original payment to a Dubai account, but a sophisticated scammer intercepted emails and impersonated Mr L to request a change of recipient account, which Caxton processed without additional verification. The ombudsman found that U did not authorise the diverted payment and that U was not grossly negligent under the Payment Services Regulations 2017, as the scam was highly sophisticated and the gross negligence standard is very high. The ombudsman upheld the complaint and ordered Caxton to refund the $33,000 plus associated fees and 8% simple interest.
The Ombudsman's reasoning
The ombudsman applied the Payment Services Regulations 2017, which establish that payment service users are responsible for authorised payments but not unauthorised payments, except where the user has acted fraudulently or with intent or gross negligence. The ombudsman found that U did not authorise the payment to the diverted account, as it was the fraudster who impersonated Mr L to request the change. The ombudsman rejected Caxton's argument that U was grossly negligent, noting that the FCA interprets gross negligence as a very high standard requiring a very significant degree of carelessness. Given the sophistication of email interception scams and the lack of evidence of gross negligence by U, the ombudsman concluded that U should not be held liable for the unauthorised payment.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Caxton Payments Limited, all decisions | 10 | 60% |
| Fraud reimbursement (APP scams), all decisions | 19,453 | 22% |
| Other regulated product, all decisions | 51,105 | 30% |
Source
Read the original decision on the Financial Ombudsman Service website