Not upheld: internal fraud by authorized signatory; failure to prevent misappropriation; poor service in providing account information complaint against V (anonymized)

Decision detail

Summary

V, a company, complained that Lloyds Bank failed to prevent or reimburse approximately £235,000 misappropriated by Miss B, an authorized signatory and staff member, who made over 250 fraudulent payments to her personal accounts between May 2022 and February 2025 by changing payee account details. V argued Lloyds should have identified the suspicious pattern of payments, COP warning overrides, and transfers to Miss B's accounts, and should have provided account statements promptly to enable recovery. The ombudsman found the payments were authorized by Miss B as a signatory, and while Lloyds has monitoring obligations, the transactions were not sufficiently unusual or suspicious to warrant intervention given they were made by a long-standing authorized user in line with normal account patterns. Although Lloyds provided poor service in handling statement requests, this did not change the liability position as funds were already withdrawn and unrecoverable. The complaint was not upheld, and the £500 compensation already paid was deemed sufficient.

The Ombudsman's reasoning

The ombudsman found that the payments were authorized by an authorized signatory (Miss B), which is the starting point for determining liability under the Payment Services Regulations. While Lloyds has a duty to exercise reasonable skill and care and monitor accounts for suspicious activity, the ombudsman concluded that the fraudulent payments were not sufficiently unusual or suspicious to warrant intervention. The payments were made by a long-standing authorized user using genuine security credentials, were in line with previous transaction patterns, amounts, and frequency, and were broadly to existing or expected payees. Although COP warnings were generated, Miss B had the authority to override them. The ombudsman noted that after initial mismatches, the pattern became typical for the account. The ombudsman acknowledged poor service in Lloyds' handling of statement requests but found this did not change the liability position, as funds were already withdrawn and unrecoverable by that time.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website