Upheld: Fraud reimbursement (APP scams) complaint against Starling Bank Limited
Financial Ombudsman decision DRN-6445264 of 2026-06-22T00:00:00+00:00. Fraud reimbursement (APP scams) complaint against Starling Bank Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6445264 |
|---|---|
| Decision date | 2026-06-22T00:00:00+00:00 |
| Firm | Starling Bank Limited |
| Product | Current account |
| Claim type | Fraud reimbursement (APP scams) |
| Outcome | Upheld |
| Remedy | Starling Bank Limited must: (1) Refund £31,100 minus any excess up to £100; (2) Add 8% simple interest per year from 23 January 2026 until settlement; (3) Provide a tax deduction certificate if requested; (4) Optionally take an assignment of rights to future distributions from the liquidation process to avoid double recovery, subject to providing a draft assignment to G for agreement first. |
Summary
G, a limited company directed by Ms G, invested £31,100 in what appeared to be a legitimate social housing investment opportunity offered by Company S, with funds sent to regulated solicitors who transferred them to Company S. When Company S's directors were arrested in January 2025 and the company subsequently entered liquidation, G received no returns and discovered the investment was a scam. Starling Bank refused to reimburse G's loss under the APP Scam Reimbursement Rules, arguing the payment went to a genuine regulated firm of solicitors. The ombudsman upheld G's complaint, finding that Company S was operating a fraudulent scheme (not a failed investment) based on evidence including selling investments without underlying property agreements, passing funds to another likely scam, and paying returns exceeding legitimate income. The ombudsman rejected Starling's argument that the solicitor intermediary prevented the rules from applying, finding the solicitors acted on behalf of the fraudster rather than the consumer. The ombudsman ordered Starling to refund £31,100 (minus up to £100 excess) plus 8% interest from January 2026.
The Ombudsman's reasoning
The ombudsman applied the APP Scam Reimbursement Rules, which operate on a no-fault basis. The key question was whether G was the victim of an APP scam, defined as fraudulent deception causing a consumer to transfer funds for a purpose different from their intended purpose. The ombudsman found that Company S was, on the balance of probabilities, operating a fraudulent scheme (not merely a failed investment) based on multiple factors: selling investments without underlying property agreements, passing funds to another likely scam (Company C), paying returns that exceeded legitimate income (suggesting a Ponzi scheme), and receiving investment capital far exceeding genuine activity. The ombudsman rejected Starling's argument that the payment to solicitors prevented the rules from applying, finding that the solicitors acted as intermediaries on behalf of Company S (the fraudster) rather than G (the consumer), similar to 'money mule' scenarios covered by PSR guidance. The ombudsman also found that G did not act with gross negligence in proceeding after Starling's intervention, as the scam was complex, Company S appeared legitimate, and G had received reassurance from multiple sources.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Starling Bank Limited, all decisions | 1,021 | 25% |
| Fraud reimbursement (APP scams), all decisions | 20,976 | 21% |
| Current account, all decisions | 52,014 | 19% |
Source
Read the original decision on the Financial Ombudsman Service website