Upheld: Authorised Push Payment (APP) Scam - Investment Fraud / Failure to Reimburse under CRM Code complaint against Starling Bank Limited

Decision detail

Summary

T, a limited company, invested £89,250 with Company S between May 2022 and May 2024 in what it believed were legitimate rent-to-rent property investments secured against social housing contracts. T received returns totalling £64,060 until January 2025, when Company S directors were arrested and the company subsequently entered liquidation. T claimed £25,210 in outstanding losses as an APP scam victim. The ombudsman upheld the complaint, finding that Company S was operating a Ponzi scheme using new investor funds to pay existing investors rather than for stated purposes, despite initially appearing legitimate. Although Starling argued it could not have prevented the loss and that T failed to conduct due diligence, the ombudsman found these arguments irrelevant under the CRM Code, which requires reimbursement absent specific exceptions that did not apply here. Starling was directed to reimburse T's loss plus interest.

The Ombudsman's reasoning

The ombudsman determined that Company S was operating a Ponzi scheme rather than a legitimate investment, based on evidence that it was using new investors' funds to pay returns to existing investors and for personal withdrawals rather than for the stated property investment purposes. Although Company S initially appeared legitimate and T had a reasonable basis for belief, the evidence collectively demonstrated fraudulent intent. The ombudsman rejected Starling's arguments that it could not have prevented the loss or that T failed to conduct due diligence, finding that the applicable test under the CRM Code did not require prevention of loss but rather reimbursement absent specific exceptions. None of the CRM Code exceptions applied: T had a reasonable basis for belief, the warnings provided were generic and ineffective, and Starling had no valid grounds to refuse reimbursement.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website