NatWest Customer Scammed out of £600k Receives Substantial Compensation Payment

Mr D, a director of Company A, was contacted out of the blue by a scammer claiming to be calling from Bank M (not the company’s bank), providing information about potential share investments; Mr D was then convinced to ‘invest’ in two corporate bonds.

Corporate bonds work similarly to IOUs, and investors who purchase corporate bonds (as Mr D believed he was doing) are effectively lending money to the firm issuing the bond; the firm then agrees to make periodic interest payments and repay the principal amount at a specified maturity date.

The scammers convinced Mr D to transfer £300,000 to a beneficiary account with another bank, Bank H, and then to make several further payments totalling £300,000 to electronic money institution ‘Company C’ over the following weeks. The fraudsters had been operating under the names of genuine employees of Bank M, so when Mr D carried out due diligence checks before making the payments, he was satisfied that the communications were legitimate. It wasn’t until Mr D called Bank M and asked to speak to these employees directly, four months after the initial payments were made, that the scam was uncovered and reported to NatWest.

On being informed of the scam by Mr D and Company A, NatWest contacted Bank H and Company C, the recipients of the fraudulent money, in order to recover whatever money might still be available. The majority of the payment made to Bank H was able to be returned (just under £294,000), but the money moved to Company C had been moved on and was unrecoverable.

This scam tactic is known as Authorised Push Payment (APP) fraud, a form of cybercrime where fraudsters trick victims into sending instantaneous money to their accounts, sometimes using social engineering schemes incorporating impersonation. Scammers gain the victim’s confidence or appear to be someone they trust, such as a solicitor or, in Company A’s case, an investment adviser.

As the victim believes the transfer is genuine and legitimate, the money is often lost before any alarm bells ring, and the victim may be too embarrassed to do anything about it. These payments are usually made abroad, making it impossible to trace or recover what has been lost, as in this case.

Following the initial recovery of the money from Bank H, NatWest accepted some responsibility for the loss of the remaining £300,000 transferred to the electronic money institution, Company C, and offered to reimburse 50%, claiming that Mr D and Company A should take responsibility for the remaining 50% (£150,000). Mr D and Company A disagreed, and the complaint was taken to the Financial Ombudsman Service.

Mr D and Company A claimed that they had performed as much due diligence as they could have in the circumstances. NatWest accepted that there were further checks it could have conducted, but that Mr D and Company A could have done more to prevent the loss with some simple online research.

Ultimately, the investigation concluded that the responsibility should be shared between Company A (and Mr D) and NatWest, with each party responsible for 50% of the loss. The investigator also instructed NatWest to return a further £25,000 to the victims and cover interest from the date of the scam. In total, including the money recovered from Bank H, Mr D and Company A, were compensated £475,000.

Banks in the UK have a duty to their customers to have in place procedures, systems, and policies to detect and prevent financial fraud, including:

• Monitoring customer accounts.
• Providing effective warnings.
• Detecting suspicious activity.
• Using industry intelligence to prevent fraudsters from creating bank accounts.

When banks have been found not to have upheld their responsibilities to customers, resulting in scams, the case can be referred to the Financial Ombudsman Service and, in increasing cases, significant compensation can be secured.

Sarah Spruce, Head of the APP Fraud team at TLW Solicitors, commented on the FOS decision:

“This was a very interesting case, with a lot of moving parts and a very intricate scam, so it is encouraging to see the victims receiving a substantial amount of compensation. It just goes to show that FOS investigations can be as complicated as the scams themselves, so it is important to get advice from an experienced team who understand the claims process inside out.”