Not upheld: scam / fraud - investment scam (pump and dump); refusal to reimburse complaint against HSBC UK Bank Plc

Decision detail

Summary

Mr S and Mrs S complained that HSBC refused to refund money lost to an investment scam. Mr S had made several payments to a share dealing platform he believed was legitimate, but the investment was later exposed as a 'pump and dump' scam when the shares lost most of their value. HSBC refused the claim on the basis that the PSR 2017 reimbursement scheme did not apply, as the payments were sent to an account in Mr S's name and control. The ombudsman found that while HSBC should monitor for fraud, the specific circumstances did not warrant prevention of the payments. Mr S's explanation to the HSBC advisor that he was investing through an FCA-registered platform was reasonable, the account was in his control, and the fraud was not exposed until after the final payment. The ombudsman concluded that HSBC could not reasonably have prevented the payments or recovered the funds, and the loss resulted from the investment's decline rather than from the bank's actions. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while HSBC should monitor for fraud and take additional steps in some circumstances, the specific circumstances here did not warrant prevention of the payments. Although some transaction amounts were concerning and HSBC did intervene, Mr S's explanation that he was buying shares through an FCA-registered platform was reasonable. The platform was legitimate and the account was in Mr S's control. The 'pump and dump' scam was not exposed until after the final payment, so earlier questioning would not have revealed the fraud. The money was not sent to a third party but to Mr S's own account, which is atypical of investment scams. Without evidence that the platform was involved in the scam or that Mr S lacked control, HSBC could not reasonably have identified suspicious activity. Recovery was not possible as the platform provided the intended service and the loss resulted from the investment's decline in value, not from the bank's actions.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website