Not upheld: internal fraud/unauthorized transactions by employee complaint against TSB Bank Plc

Decision detail

Summary

B, a business, complained that TSB Bank Plc wrongfully declined to reimburse them for over £690,000 in fraudulent transfers made by employee X over approximately two years. X had been given access to a director's phone to make legitimate supplier payments but instead made over 350 transfers to themselves, disguising them as payments to legitimate suppliers. TSB declined reimbursement, arguing that B had authorized X's access and the payments did not appear high-risk. The ombudsman upheld TSB's decision, finding the payments were authorized, did not stand out as unusual compared to the account's normal activity, and that TSB had no obligation to refund under applicable regulations or their fraud guarantee.

The Ombudsman's reasoning

The ombudsman found that TSB was entitled to treat all payments as authorized since X had been given genuine access credentials by B to make payments. The payments did not stand out as particularly high-risk compared to the account's normal activity - the amounts were consistent with legitimate supplier payments, the account balance remained healthy, and the perpetrator deliberately disguised the payments using legitimate supplier names. While CoP mismatches occurred, presenting a warning would have been proportionate, but TSB was not obliged to prevent the payments. The ombudsman noted that internal theft is difficult to identify as high-risk when the perpetrator uses genuine credentials and takes steps to hide their actions.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website