Upheld: authorised push payment fraud - reimbursement under CRM Code complaint against Starling Bank Limited

Decision detail

Summary

Mr I invested £15,100 in what he believed was a legitimate social housing investment opportunity through Company S in August 2024, but the scheme failed to deliver promised returns and was revealed to be under police investigation. Starling Bank Limited refused reimbursement, arguing the investment had failed rather than constituting fraud. The ombudsman found sufficient evidence that Company S was operating a fraudulent scheme involving misrepresentation of fund use and investment risk, with Ponzi scheme characteristics. As Starling was a signatory to the CRM Code, it was obligated to reimburse Mr I for authorised push payment fraud, and no exceptions to reimbursement applied. The ombudsman upheld the complaint and ordered Starling to reimburse the full £15,100 plus interest.

The Ombudsman's reasoning

The ombudsman applied the civil standard of proof (balance of probabilities) rather than criminal standard, finding sufficient evidence that Company S was operating a fraudulent scheme. The payment fell within the CRM Code's scope as the customer transferred funds believing they were for legitimate purposes when they were actually fraudulent. The fraud was well-disguised, and Mr I had a reasonable basis for believing it was legitimate given the professional presentation, broker introduction, and involvement of a regulated solicitor. Starling could not rely on exceptions to reimbursement under the CRM Code, as Mr I did not make the payment without reasonable basis for legitimacy and was not provided an effective warning. The fact that Starling could not have prevented the fraud is not an exception to reimbursement under the voluntary CRM Code.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website