Not upheld: Fraud reimbursement (APP scams) complaint against Starling Bank Limited

Decision detail

Summary

V, a limited company, invested £13,500 through Starling Bank in a purported social housing investment scheme operated by company C, which was later determined to be a scam. V received initial returns but these stopped and C went into liquidation. While the FOS Investigator found the payment should be covered by the Contingent Reimbursement Model Code, the ombudsman declined to award compensation because V had received over £14,000 in commission payments from C for referring other investors, plus approximately £29,000 from a linked fraudulent scheme, resulting in a net profit despite the £11,100 investment loss. The ombudsman found the evidence did not support Mr K's claims of extensive work and determined it would be unfair to compensate V further when V had already profited from its association with the scammer.

The Ombudsman's reasoning

While the ombudsman agreed that C was operating a scam and that the payment would normally be covered by the Contingent Reimbursement Model Code with no applicable exceptions, the decision focused on what constitutes fair compensation in all circumstances. The ombudsman determined that V should not be compensated by Starling because V had profited overall from its association with the scammer through generous commission payments for referring investors. The ombudsman found that the evidence did not support Mr K's claims of extensive work (such as 10+ hour days, 7 days a week), but rather showed mostly templated communications and referral of four investors. The ombudsman reasoned that the generous commissions were themselves a product of the scam's lack of economic reality, and that it would be unfair to compensate V further when V had already received over £14,000 in commissions against an investment loss of £11,100, resulting in a net profit from the fraudulent scheme.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website