Not upheld: scam reimbursement / fraud protection complaint against HSBC UK Bank Plc

Decision detail

Summary

Mr and Mrs P invested £140,000 in Company A for property development between August 2019 and February 2020 via cheque payments. When Company A entered administration, they reported it to HSBC as a potential scam and sought reimbursement. HSBC declined, and the complaint was referred to the FOS. The ombudsman found that while the investment resulted in loss, the evidence did not establish fraudulent intent by Company A, as the company had completed multiple property development projects. The ombudsman concluded that banks' fraud protection obligations only apply where a scam is established, and that banks are not responsible for protecting customers from unwise investment decisions. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that to establish fraud, there must be evidence of a misalignment between the stated purpose and actual use of funds, combined with dishonest deception. The evidence showed Company A completed at least three large-scale projects and was involved in others, suggesting the funds were used for the intended purpose. High commissions and poor returns could be explained by poor financial planning, overly optimistic business modelling, or mismanagement rather than fraudulent intent. The bank was not responsible for protecting customers from unwise investment decisions or identifying general investment risks.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website