Not upheld: Authorised Push Payment (APP) Scam - Insufficient due diligence and delayed fraud reporting complaint against Lloyds Bank Plc

Decision detail

Summary

Mr O lost £4,700 to a visa scam after being contacted by a fraudster on social media who claimed to arrange a certificate of sponsorship visa for his brother. He made two payments to personal bank accounts without verifying the legitimacy of the service or the person involved. Lloyds offered 50% reimbursement plus interest and compensation, acknowledging it had not contacted the receiving banks promptly when the scam was reported. The ombudsman upheld Lloyds' position, finding that Mr O did not have a reasonable basis for belief in the legitimacy of the arrangement, as it exhibited multiple red flags including social media contact, lack of formal paperwork, and a dissolved company. Although Lloyds made an error in not contacting the receiving banks, the funds had already been removed, so this error did not cause the loss.

The Ombudsman's reasoning

The ombudsman applied the Contingent Reimbursement Model Code (CRM Code) framework. The key finding was that Mr O did not have a reasonable basis for belief that he was paying a legitimate business. The arrangement exhibited multiple red flags: it was conducted via social media and text messaging without formal paperwork, the company had no online presence and was dissolved, no questions were asked about the visa applicant, and payments were requested to personal accounts with instructions not to tell anyone. The ombudsman concluded that Mr O should have had concerns from the outset and should have conducted greater checking. While Lloyds failed to contact the receiving banks promptly, this error did not result in Mr O's loss as the funds had already been removed. The ombudsman found no evidence that Mr O was vulnerable to the extent that he could not reasonably be expected to protect himself.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website