Upheld: APP scam reimbursement under CRM Code - failure to provide effective warning complaint against Starling Bank Limited

Decision detail

Summary

L, a limited company directed by Mr P, invested £13,500 with company C in August 2024 for a purported social housing investment scheme. C was operating a sophisticated investment scam that received approximately £20,200,000 from investors but did not use funds for genuine property development, instead spending capital on personal expenses, cash withdrawals, and duplicate property sales. When L did not receive promised returns, Starling Bank declined to refund the loss, characterizing it as an unsuccessful investment and civil dispute. The ombudsman upheld the complaint, finding that L was a victim of an APP scam under the CRM Code, that Starling failed to provide an effective investment-specific warning despite identifying the risk, and that Mr P had a reasonable basis for believing the investment was legitimate. Starling was directed to refund £13,500 plus 8% simple interest per annum.

The Ombudsman's reasoning

The ombudsman found that L's payment met the CRM Code definition of an APP scam because C received the payment through dishonest deception, despite claiming to offer legitimate property investment. The evidence showed C did not use investor funds for genuine property development as represented, with misaligned spending patterns, duplicate property sales, forged documentation, and unexplained cash withdrawals. Although Starling identified an APP scam risk and contacted Mr P, it failed to provide an effective warning specific to investment scams as required by the CRM Code. Mr P had a reasonable basis for believing the investment was legitimate given he was introduced by a trusted sourcing company, provided with professional materials, able to discuss directly with C, and there was nothing significant in the public domain at the time to indicate fraud. The high promised returns and failure to check FCA registration were insufficient to undermine Mr P's reasonable belief, particularly given Starling itself remained uncertain whether this was a legitimate failed investment.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website