Not upheld: Fraud reimbursement (APP scams) complaint against Starling Bank Limited

Decision detail

Summary

Company S, through its director Mr M, complained that Starling Bank failed to prevent a £25,000 payment to company R for a rent-to-rent property investment scheme and should reimburse the funds under the CRM Code. Mr M claimed R was operating a scam because it offered high guaranteed returns, involved an undisclosed property management company, ceased payments after three months, and subsequently took on new investors while unable to pay existing ones. The ombudsman rejected the complaint, finding that S had not demonstrated R had fraudulent intent when accepting the funds. The joint venture agreement clearly referenced a property management company, returns were not guaranteed, and confidential evidence showed funds being used as expected. While Starling should monitor for suspicious activity, the ombudsman could not establish that intervention would have prevented the loss given R's apparent legitimacy.

The Ombudsman's reasoning

The ombudsman applied the CRM Code definition of an APP scam, which requires either deception into transferring funds to a different person, or transfer for purposes believed legitimate but actually fraudulent. The burden was on Mr M to demonstrate S was a victim of an APP scam. The ombudsman found insufficient evidence that R had a different purpose in mind when accepting the funds or that there was fraudulent intent. The joint venture agreement clearly referenced involvement of a property management company, returns were not guaranteed (being subject to receipt of payments from the management company), and confidential evidence showed funds being used consistently with the agreed purpose. The ombudsman rejected arguments based on high returns, director resignations, taking new investors, and property type as insufficient to demonstrate fraudulent intent. Regarding Starling's conduct, while the payment was unusual, the ombudsman could not establish that suitable intervention would have prevented the loss, as R appeared to be a legitimate company with proper documentation.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website