Not upheld: Fraud reimbursement (APP scams) complaint against Cater Allen Limited

Decision detail

Summary

A Small Self-Administered Scheme (SSAS) pension trust invested £135,000 with company C through three loan agreements, believing the funds would be used for property developments. When company C entered administration in 2022, the SSAS discovered the funds had been misused and requested reimbursement from its bank, Cater Allen, under the voluntary CRM Code for scam victims. Cater Allen declined the claim, stating the SSAS did not meet the eligibility criteria and the matter was a civil dispute. The ombudsman upheld Cater Allen's decision, finding that the SSAS does not qualify as a 'micro-enterprise' under the CRM Code because it is not engaged in economic activity—it merely holds and invests funds for beneficiaries rather than offering goods or services to an external market. The ombudsman also found that Cater Allen acted reasonably in processing the payments, as there were no public warnings about fraud involving company C at the time.

The Ombudsman's reasoning

The ombudsman applied the defined term 'micro-enterprise' under the CRM Code as set out in regulation 2(1) of the PSRs, which references the Micro-enterprise Commission Recommendation 2003/361/EC. The key question was whether the SSAS was engaged in 'economic activity' at the time of the payments. The ombudsman concluded that the SSAS was not engaged in economic activity because: (1) the SSAS is an instrument for holding and investing funds for beneficiaries, not offering goods or services to an external market; (2) the investment was made solely to generate profit for internal beneficiaries, which is akin to purchasing services rather than offering them; and (3) outputs of investment that are solely internal do not engage with an external market. Therefore, the SSAS does not meet the definition of micro-enterprise and is not eligible for protection under the CRM Code. On the separate question of whether Cater Allen should have done more to protect the SSAS, the ombudsman found that although the payments were unusual, there were no public warnings about fraud involving company C at the time, and the SSAS had undertaken due diligence and would likely have proceeded with the payments even if questioned by the bank.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website