ClearBank Instructed to Reimburse Business Which Lost Over £42,000 to APP Scam

ClearBank is the largest next-generation clearing and embedded banking platform in the UK. Clearing banks are financial institutions that help other banks exchange money and settle transactions, ensuring that payments go smoothly and safely. ClearBank partners with other financial institutions, such as Tide and Coinbase, to offer their customers real-time payment and innovative banking services.

It is not confirmed in the FOS decision which of ClearBank’s partners that scam victim, T, was affiliated with.

A business bank account holder, known only as T, received a call from an individual claiming to be from ClearBank, referred to as X. The call came through on the same number that T had on the back of his ClearBank-issued card, so he was reassured that the caller was legitimate.

This tactic is known as ‘number spoofing’ and occurs when cybercriminals use sophisticated software to trick Caller ID into showing a specific phone number – not the one the caller is actually using. Scammers use this to display the genuine phone numbers of victims’ trusted institutions and convince them that the call is legitimate.

X told T that they were ringing as T’s ClearBank account had been breached, and the funds held within it needed to be moved to a new ‘safe account’ to prevent further fraud. T was instructed to scan a QR code in order to set up and authorise new payees to transfer the funds, one of which was in T’s name, the other in the name of SARAVANAN PALANIMALAI LTD. Neither of these accounts was in T’s control. In total, T transferred £42,913.65 over two transactions.

The type of fraud used in T’s case is known as Authorised Push Payment (APP) fraud, which occurs when the victim is tricked into willingly transferring (or authorising) payments from their account as part of a scam. The faster payments system, used by most financial institutions, sees the money immediately exit the victim’s account and be deposited into the scammer’s straight away and, in many cases, the scammer then moves the money on again to a secondary account – which is usually held overseas – making it virtually impossible to recover or refund.

APP scams are, unfortunately, incredibly effective as the scammer uses social engineering techniques such as emotional manipulation or impersonation to gain the victim’s trust and convince them that the reason for the transaction is legitimate. As well as impersonation scams, APP fraud can take the form of romance, investment or cryptocurrency, conveyancing, and employment scams.

However, losing money to a scam doesn’t need to be the end of the road. In the UK, banks and financial institutions have a duty of care to customers to protect them and their accounts from scams and fraud. The Financial Ombudsman Service (FOS) has made some important recent decisions about push payment fraud and the banks’ responsibility to their customers. FOS is the independent body set up to settle disputes between financial institutions and their customers.

If you disagree with the bank’s investigations following an APP scam, you can take your case to FOS, which will conduct its own investigation. FOS has the power to award financial compensation.

In T’s case, once the scam was uncovered, the business alerted ClearBank, which attempted to recover the funds, but the receiving accounts had already been emptied, and the money moved on. T complained to the Financial Ombudsman Service (FOS) that ClearBank should have prevented the scam from taking place, and their initial complaint was upheld; however, ClearBank disagreed, and the complaint was escalated to an Ombudsman for a final decision.

The Ombudsman reviewed T’s case again and agreed with the initial decision to uphold the complaint. The Ombudsman stated that, although T authorised the payments, banks and payment services providers (PSPs) have a duty to protect consumers from fraud on their accounts. The first payment of £30,000 from T’s account should have raised red flags with the bank and prompted it to ask questions about the transaction, which would likely have uncovered the scam and prevented the second payment.

As a result, ClearBank was instructed to refund the total amount lost (£42,913.65) to T, plus 8% interest.

TLW Solicitors’ dedicated APP Fraud team regularly deals with FOS and we understand the time limits to be followed, the information needed and the claims and appeals processes. The team will also deal with any complex legal arguments and defences the bank may raise. The combination of our experienced team and digital case management systems means we proactively pursue your claim and aim to get the best possible results.

Sarah Spruce, Legal Director and Head of the APP fraud team at TLW Solicitors commented:

“T’s story is a great example of how, even if you have authorised payments yourself as a result of a scam, it is not the end of the road, and compensation is still an option, even if your bank continues to deny responsibility. Banks and financial institutions are the experts in your financial relationship, and they can – and should – be doing more to ensure that their clients’ money is safe and secure in their accounts.”