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

Decision detail

Summary

M, an association, complained that Cater Allen should reimburse £27,207 in payments made to Ms Y, a freelance administrator, claiming she had committed fraud by invoicing for work not completed. Ms Y had previously attempted to be added as an account signatory but was declined by Cater Allen. M made four payments to Ms Y between April and June 2024 after she claimed they were approved by the treasurer, but M later discovered much of the invoiced work had not been completed. The ombudsman found this was a contractual/employment dispute rather than an APP scam under the CRM Code, as Ms Y had undertaken at least some legitimate work for M and the payments were made for purposes M believed were legitimate. The ombudsman also found M had failed to follow its own internal approval procedures by not verifying Ms Y's claims of treasurer approval. Accordingly, the complaint was not upheld and Cater Allen was not required to reimburse M.

The Ombudsman's reasoning

The ombudsman concluded this was not an APP scam under the CRM Code definition because Ms Y was engaged by M (albeit on a self-employed basis) and had undertaken at least some legitimate work for the association. The payments were made for purposes M believed were legitimate (work completion and expenses), even if Ms Y had not completed all work invoiced. This constitutes a contractual/employment dispute rather than fraud meeting the CRM Code definition. Additionally, M failed to follow its own internal approval procedures by accepting Ms Y's claims of approval without verification from Mr O. The payments were not unusual or out of character for the account, so Cater Allen had no duty to intervene. The bank acted reasonably in declining the mandate request without notifying M, as it had no knowledge of fraud.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website