TLW Client Successfully Claims Against Santander Following Cryptocurrency Investment Scam

Scammers have become very clever in recent years, thinking up new ways to trick unsuspecting people into parting with their hard-earned cash. One way, which cost the UK over £340 million in 2023, is through APP fraud.

Authorised Push Payments (APP) are a convenient way to quickly transfer money. To make a payment, you simply need to add the recipient’s bank details, the amount to be paid, and a brief reason, often from a drop-down list. The money is then sent almost immediately via the Faster Payments Scheme (FPS). Unfortunately, APP fraud has become one of the most common types of scam in the UK as fraudsters are able to convince people to send large amounts of money under false pretences and using social engineering tactics.

Mr B took his complaint to the Financial Ombudsman Service (FOS), an independent, government backed body set up to settle disputes between regulated financial organisations, like Santander, and their customers.

A FOS investigator looked at the case and considered all the evidence available, together with Santander’s response to the complaint. They did not uphold Mr B’s complaint and said that Santander should not reasonably have been expected to prevent the fraud, as:

• Mr B had openly admitted he was intending to buy cryptocurrency, which he did.
• Legitimate cryptocurrency transactions were becoming increasingly popular in 2021.
• There was no evidence to indicate that the payments were unusual or suspicious and might be fraudulent.
• A new payee Mr B had authorised was an individual, not a company associated with cryptocurrency trade.
• Other payments went to a cryptocurrency account in Mr B’s own name.
• Mr B had made payments for similar amounts in the previous year to other investment platforms.
• There were always sufficient funds in his account to make the payments.
• Mr B chose to ignore the standard scam warnings that would have appeared on his screen before authorising the payments.
• Mr B was the victim of a separate scam a few days before he began buying cryptocurrency, so he should have been more cautious and carried out sufficient due diligence.

In reality, Mr B had lost £15,000 in the first scam, was completely taken in by the professional-looking websites and the high returns promised by the cryptocurrency investment adviser and ended up having to take out loans to pay the final demands in an attempt to release his money.

Mr B did not accept the FOS investigator’s decision and, with the help of TLW Solicitors’  Push Payment Fraud claims team, asked for the case to be escalated to an Ombudsman.

FOS investigations are a two-stage process where either or both sides can ask for an Ombudsman’s final decision following the initial investigation. The independent Ombudsman fully reviews the case again, rather than simply ‘rubber stamping’ the Investigator’s view, meaning an earlier decision can be overruled.

Overruling an earlier decision is exactly what happened in Mr B’s case. The Ombudsman decided to uphold Mr B’s initial complaint in part. The Ombudsman concluded that:

• Santander had a duty to monitor its customers’ accounts and payments to prevent fraud and scams.
• The bank could have looked for “particularly unusual transactions or other signs its customers were at risk of fraud”.
• Santander should have made checks before payments went out, or blocked them, irrespective of the type of payment involved.

In particular, the Ombudsman said there was actually ‘very little comparable activity’ on Mr B’s account in the months leading up to the scam. In other words, his payments to the scammers were out of character compared to the usual transactions on his account, this in turn, was a ‘red flag’ for a possible scam.

The Ombudsman decided that Santander should have intervened after the third payment (for the sum of £5,200), as the frequency and number of payments leaving Mr B’s account were increasing rapidly – and they were going to a new payee, a cryptocurrency firm. This is a common tactic scammers use to gain their victims’ trust and help fool banks’ security.

By 2021, the Financial Conduct Authority (FCA), the body regulating financial services in the UK, had issued warnings about cryptocurrency scams. Santander should have been well aware of how they worked and the risks to their customers. It was considered good industry practice to have systems in place to monitor accounts for fraud, stepping in to delay or block payments when necessary.

The Ombudsman went on to point out that:

• Had Santander intervened and asked more questions, they could have uncovered the scam and prevented further financial loss.
• Mr B was unlikely to lie about the transactions to Santander, as he genuinely believed he was investing – and is likely to have listened to their warnings and stopped making more payments.

The Ombudsman decided that Santander was partly liable for Mr B’s losses from the third payment onwards. The bank was directed to refund 50% of each subsequent scam payment (around £20,000). Mr B would also receive interest at 8% on the total amount from the date each payment was made until the date of the refund.

Sarah Spruce, Legal Director and Head of the APP Fraud claims team, said of the result:

“Mr B asked us to help with his refund claim. He had lost a lot of money and wanted to do everything he could to get it back. The banking industry has had to change a lot in recent years due to APP fraud, and the Financial Ombudsman Service has been increasingly finding in favour of the customer, not the bank.

“We believed the scammers had genuinely taken in Mr B and Santander should have done more to prevent financial harm. The two-stage process that FOS adopts can seem complicated, but the opportunity to submit additional evidence was welcome in this case, as we were able to fully investigate his case, gather more evidence and then respond to each of Santander’s submissions. The positive result we achieved for Mr B shows that having specialist help on your side can really pay off.

“The FCA has recently introduced a mandatory reimbursement scheme for APP fraud cases, requiring all banks and e-money institutions to refund money lost through APP scams within five working days, in most cases. This is a huge and welcome change in the financial services industry, aiming to protect victims better and tackle APP fraud nationally.”