Lloyds Bank PLC · DRN-6029650

The complaint Mr and Mrs J complain that Lloyds Bank PLC won’t refund the money they lost when they fell victim to a scam. What happened The details of this complaint are well known to both parties, so I won’t repeat them all again here. But I have summarised the key events and arguments relevant to my determination. In 2022, due to some life events, Mr and Mrs J decided to sell their family farm. This left them with a significant amount of funds in cash. Mrs J was worried about having all the funds in one place due to FSCS compensation limits, and wanted to make the most of the money, so started looking into investment options. She was then contacted by someone claiming to be from “D Bank” offering an investment opportunity. Unfortunately, the individual was actually a scammer impersonating D Bank. The scammer told Mrs J they could offer her and Mr J a bond of £85,000 each, which she understood was linked to another firm. She says she tried to arrange an appointment with Lloyds to get financial advice in July 2022, but none were available until September 2022. She ultimately decided to proceed, sending £170,000 to an account held with D Bank in August 2022. She then sent a further five payments for this amount to the same account across August and September 2022 – each to purchase similar bonds through D Bank. When Mrs J told the scammer she only had smaller amounts to invest going forward, they suggested she switch to investing in shares. She sent four payments totalling £250,000 to another account held with a different bank between December 2022 and June 2023, supposedly for three investments in shares with different companies. Before making the final payment, Mr and Mrs J received a supposed return of £3,761.39 in March 2023. Mrs J realised it was a scam when attempting to withdraw further funds. She and Mr J (who wasn’t aware of the payments at the time) complained that Lloyds hadn’t done enough to protect them from the scam. Lloyds paid £1,500 compensation for the impact of its service failings looking into the matter. It also agreed to refund 50% of payments sent to the scam, less the credit received, from the second payment onwards (along with interest). In summary, it said it could have done more to protect Mr and Mrs J when the pattern of payments emerged – but they could also have done more to protect themselves, so liability should be shared. Unhappy with the liability split, Mr and Mrs J referred the matter to our service. Our investigator concluded Lloyds had fairly compensated them for this complaint. They appealed her outcome. In summary, they said their vulnerability hadn’t been properly considered; Mrs J took reasonable steps to look into the investment; and Lloyds failed to appropriately protect her – particularly as all the payments were made in branch. They also said Lloyds dealt with their complaint poorly.

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I then issued my provisional decision explaining why I was minded to conclude Lloyds should pay further compensation so that, in total, it pays 75% of Mr and Mrs J’s loss due to the scam: In line with the Payment Services Regulations 2017, firms are expected to process authorised payment instructions without undue delay. And it’s accepted that Mrs J authorised these payments. While it was highlighted during the complaint that Mr J wasn’t notified of the payments by Lloyds, I haven’t seen any suggestion that the mandate for the account meant both of their permission was required to make payments. It seems, as is common for joint accounts, Lloyds could accept instructions from just one account holder. So, the starting position is that Mr and Mrs J are liable for the payments Mrs J made. However, in line with longstanding regulatory expectations and requirements and what I consider to be good industry practice at the time, I’d expect Lloyds to have been on the lookout for the possibility of fraud. If there was reason to suspect a payment might be linked to fraud, it might be reasonable for Lloyds to have made further enquiries before deciding whether to process it. If Lloyds failed to respond proportionately to such a risk, and doing so would have prevented Mr and Mrs J from incurring a fraudulent loss, it may fairly hold some liability. Here, Lloyds appears to accept it should have prevented Mr and Mrs J’s fraudulent loss from the second payment onwards. But it says until the further payments were made, the first payment appeared a “one-off” following a large windfall from the sale of the farm, which made it seem less suspicious. It also says a high value payment checklist would have been completed, and the branch staff who served Mrs J recall her being confident that the investment was genuine and that she had done her research, making it harder to uncover that it was actually a scam. So, it doesn’t agree it ought to have prevented this payment. I understand Lloyds’ point that the emerging pattern of the payments added to how risky they looked. But on balance, I do think it likely missed a reasonable opportunity to uncover the scam when Mrs J went to branch to make the first payment. I accept Mrs J likely seemed confident in what she was doing. But in looking at what the branch staff recall about their interactions with her, I do think there were already a number of red flags that should have prompted further concern. Lloyds has suggested the account history made the payment look less concerning. While I appreciate a very substantial sum had been received, and several large payments had been made, I still think this payment looked uncharacteristic and risky compared to previous payments on the account. The largest outbound payment before the scam was £25,000 sent to an existing payee with a UK bank. I therefore think sending a payment for almost six times this size to a new, foreign payee constituted a significant increase in risk. I accept a high value payment checklist was likely completed in branch. But I think the level of risk of the payment warranted further scrutiny. Lloyds was aware that Mr and Mrs J weren’t experienced investors, and that they had come into a large sum of money shortly beforehand – making them more likely to be at risk from this type of scam.

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Based on the branch staff’s recollections, it seems clear it was discussed that the funds were being sent abroad. Lloyds also says Mrs J confirmed she had checked that the company she thought she was dealing with – D Bank – were FCA regulated. I think it should have struck them as suspicious and concerning that Mrs J would be sending funds abroad in relation to what she believed was an FCA-regulated, and FSCS-backed, investment. If Lloyds had explained why this was a concern to Mrs J, at the point before she was immersed in the scam, I think it’s likely she would have been open to taking this on board. Particularly as the payments were all completed in branch, I think this was a good opportunity to talk through and persuade her on the signs the investment might not be legitimate. Even if Mrs J was still adamant she wanted to proceed, I don’t think Lloyds should have been satisfied by this given the suspicious nature of the alleged investment. If Lloyds had therefore asked for further records about the investment, this would have highlighted further issues. For example, the correspondence from the scammer claimed to come from D Bank, which his email signature claimed was FCA-regulated – which could have been checked. This would have revealed that, while D Bank are a genuine bank, they’re not FCA regulated (due to being based/operating abroad). It could also have been identified that the “senior portfolio manager” Mrs J was speaking to was using a fake email address, allegedly from “D UK” – which doesn’t exist. I also think the document for the initial investment would likely have seemed suspicious to Lloyds. Again, it’s clear Mrs J understood she was covered by FSCS compensation limits. But the bond prospectus, while reasonably professional-looking at first glance, mentions a US “debt issuance programme”; several companies from other foreign countries – as well as some UK firms. I think this mismatch of firms and protections, as well as some confusing dates on these documents (for example, stating “the date of the Final Terms is 23 September 2021”, but then also showing an issue date in 2013 and a maturity date in 2024) could have been flagged to Mrs J as a concern. While it’s clear Mrs J was very taken in by this scam, I think she was open to input from her bank – as shown by her initial attempt to obtain advice. If Lloyds had talked through the specific factors which made the investment looked suspicious, I think it likely would have successfully persuaded Mrs J and uncovered the scam before she made the first payment. I therefore think Lloyds holds liability for the first payment. A further point I would add is that, if Lloyds had prevented these payments, Mr and Mrs J also wouldn’t have incurred the fees it charged on the payments (at £9.50 for each of the ten payments sent to the scam). So, I think Lloyds also holds responsibility for those fees; but for its errors, Mr and Mrs J wouldn’t have incurred them. However, I’ve also considered whether Mr and Mrs J should hold some responsibility for their loss by way of contributory negligence. As it was Mrs J making the payments, and as the account didn’t require Mr J’s input, I’ve mainly thought about her role in what happened.

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I’m aware Mrs J initially inquired about getting financial advice from Lloyds, and that she and Mr J are unhappy an appointment wasn’t available until September. However, she ultimately opted to proceed without taking independent advice – either by waiting until Lloyds had an appointment available, or arranging an appointment with another firm. Given Mrs J wasn’t an experienced investor and was seeking to invest such a large amount, I think that would have been a more reasonable course of action rather than relying on the word/advice of the company allegedly offering the investment. If she had done this, I think it’s likely the scam would have been identified. I can also see from Mrs J’s correspondence with the scammer that she knew the funds were being sent abroad. Given her understanding that this was an FSCS- backed investment, I think that arguably should have prompted some concern, at least to the extent that she should have looked into this further. I don’t think it was reasonable to rely on the assurances of the company offering the investment. Mrs J was also told by the scammer that D Bank (who they were impersonating) were FCA regulated – and was given their reference number to verify this. But that wasn’t true. If Mrs J had looked up and opened their entry on the FCA register, she would have seen they were no longer registered, as well as a banner warning: “Do not start to do regulated business with a PSD Agent that is no longer registered.” Mrs J says she did look up D Bank’s reference number but didn’t see they weren’t regulated. But even in looking them up on the register without opening the full entry, there is a banner which says, “No Longer Registered as a PSD Agent” with an “i” (for information) button next to it which, if selected, gives the full warning. I appreciate Mrs J may have missed or overlooked this. But again, given her situation and the high value of the investment she was intending to make, I think it would have been reasonable to check this more thoroughly – which likely would have alerted her to the indications the investment wasn’t legitimate. For these reasons, I do think it would be fair to make a deduction to the compensation to reflect Mrs J’s role in what happened. But in thinking about what is fair and reasonable in the circumstances, I’ve thought about the level of blame it would be fair to apportion to each party. As mentioned, I think Lloyds ought to have been aware that Mr and Mrs J’s circumstances could render them vulnerable to fraud. I also think its role in processing all the payments in branch gave it a good opportunity to engage with Mrs J about what she was doing and uncover the scam. I’d also expect Lloyds to have more expertise about scams – meaning they had more knowledge to identify (and warn Mrs J about) the warning signs. While I think Mrs J should have done more to protect herself, I am also mindful of her circumstances. As mentioned, she and Mr J weren’t experienced investors. Lloyds is also aware of the difficult circumstances they were in at the time. In summary, Mrs J was dealing with her own health problems as well as caring for other family members – and then found herself in a position where she was attempting to manage the (substantial) family finances largely by herself.

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I accept Lloyds likely didn’t know the extent of Mrs J’s vulnerabilities. But in thinking about what level of responsibility she should hold, I don’t think it would be fair to place the same responsibility on her as Lloyds for failing to identify the scam. I’d highlight that while I’ve focussed above on what I consider to be the overlooked risk factors, there were other factors which helped persuade Mrs J the investment was legitimate. This appears to have been a sophisticated operation that impersonated a genuine company. The correspondence was reasonably professional, and I can see why it was convincing to someone unfamiliar with investing. It’s also clear the scammer employed social engineering tactics to build up significant trust with Mrs J over time. Having carefully weighed up all these factors, I’ve decided it would be fair to reduce Lloyds’ liability by 25%, to reflect Mrs J’s role in what happened. I think a 75/25 split (as opposed to a 50/50 split) is a fairer reflection of the level of fault both parties hold. I have also considered Lloyds’ actions when the scam was reported. It says it initiated an attempt to recover the funds in October 2023, the day after the scam was reported, but wasn’t successful. Given the funds were sent abroad (making recovery more difficult), and as the scam was reported several months after the last scam payment (and more than a year after the first), I think it’s unlikely there were realistic prospects of recovering any of these funds; it’s common for scammers to move funds on promptly to avoid any recall attempts. I know Mr and Mrs J are unhappy with the level of service from Lloyds after they reported the scam. Lloyds has acknowledged its failings too; it has paid £1,500 compensation for this. It does look to me that there were delays giving an answer, and I’m not persuaded Lloyds initially gave the circumstances due consideration. This added to Mr and Mrs J’s upset at an already very difficult time. But I’m not persuaded further compensation is due for the distress and inconvenience caused by Lloyds’ errors (separate to what I’m proposing to award for the financial loss caused); I’m persuaded £1,500 fairly reflects this impact. I invited both parties to provide any further comments or evidence for me to consider. Mr and Mrs J responded to accept my provisional findings, but Lloyds appealed. In summary, it disagreed it ought to have prevented the first payment and considers its original deduction for contributory negligence fair – drawing out the following points: • Lloyds says it has a primary duty to enact authorised payment instructions promptly and it’s not under a duty to not follow an instruction which it reasonably believes is the result of APP fraud; • It’s not unusual for customers to make occasional large payments, or for customers who have come into a large sum from a property sale to want to invest; • While the payments were being sent internationally, that alone wasn’t concerning; • Mrs J was taken aside in branch and Lloyds’ staff had no concerns. She appeared confident in what she was doing, and it was dishonest of her to tell Lloyds she had completed sufficient checks into the investment; • Mr and Mrs J chose not to wait or seek alternative independent advice when Lloyds’ financial advisor wasn’t immediately available. It was their responsibility to complete their due diligence before investing. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint.

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Having done so, I’ve come to the same overall conclusions as I did in my provisional decision – which is set out above and also forms part of my final decision. So, I’ll focus here on responding to the points raised by Lloyds in response to my provisional findings. Should Lloyds have prevented the first scam payment? Lloyds is well aware that, although our service accepts it has a primary duty to enact authorised payment instructions without undue delay, there are circumstances where we’d consider it appropriate for it to take steps to assess and warn a customer of an apparent fraud risk before deciding whether to process a payment. By accepting (partial) liability for Mr and Mrs J’s loss from the second scam payment, Lloyds also appears to accept this point in principle – saying it agrees (in hindsight) that it could have done more to protect its customer. I’ve considered the arguments Lloyds has raised about why it doesn’t consider it is at fault for not preventing the first payment. But on balance, I do think it ought to have been able to uncover the scam at this point. Despite the substantial credit received in connection with the farm sale, I’ve already highlighted that the first scam payment – £170,000 sent to a new, international payee – looked significantly out of keeping with Mr and Mrs J’s usual account activity. I think the overall nature of the payment meant it identifiably carried a heightened risk of being connected to fraud. As this payment was processed in branch, this created a good opportunity for Lloyds’ staff to probe Mrs J about what she was doing – in order to fully assess and warn her about this risk. I accept Mrs J was questioned by branch staff, and that she likely did appear confident about what she was doing. But I still think there were factors that Lloyds reasonably should have been concerned about – as set out above in my provisional decision. One example of this is that Mrs J thought she was paying an FCA-regulated firm, and that the investment was FSCS backed, but the payment was sent abroad. The key point here isn’t that the payment was risky solely due to it being sent internationally. But the destination appeared to contradict what Mrs J understood and told Lloyds about how the alleged investment would operate. I think Lloyds should have realised, and warned Mrs J, this seemed suspicious. I think a conversation about this, coming from Mrs J’s long-running bank speaking from a position of expertise on scams, may well have persuaded her not to proceed. But even if not, I think Lloyds was on notice of risk factors that warranted further caution before making the payment. So, if it received pushback from Mrs J after highlighting the risk, I think it would have been proportionate to request further information about the investment before deciding whether to proceed with the payment. As detailed in my provisional decision, I think this would have brought to light further significant signs this was a scam. Such as the errors and inconsistencies in the documents Mrs J was provided by the scam company. These also showed the scammer claimed D Bank was regulated in the UK – which wasn’t true, and so ought to have been a clear indication to Lloyds that the investment wasn’t genuine.

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If Lloyds had clearly laid out and discussed these warning signs with Mrs J in branch, I’m persuaded she would have been receptive. She didn’t want to risk losing this money – and showed openness to Lloyds’ input by seeking its financial advice initially. Given all of this, on balance, I’m persuaded it’s likely that proportionate intervention on the first payment would have uncovered the scam at this point – and that Lloyds therefore fairly holds liability for this initial payment. What responsibility should Mr and Mrs J bear for their loss? While I’ve concluded Lloyds holds responsibility for Mr and Mrs J’s loss, I do think they also hold some liability for this. What remains in dispute is how this responsibility should be split between the parties. Lloyds maintains a 50% deduction from the refund is fair. It says Mrs J was dishonest in saying she had completed sufficient checks into the investment. It also says she should have got independent advice before deciding whether to proceed rather than taking the scam at face value. I do accept Mr and Mrs J fairly hold some responsibility for what happened, for the reasons detailed in my provisional decision – including that I do think it was remiss of Mrs J to proceed without obtaining independent advice. However, I don’t agree with the characterisation that she was deliberately dishonest with Lloyds about the checks she had completed. For example, I think she did look up D Bank on the FCA register – it was just that she missed the information/warning about it no longer being regulated in the UK. I think it is fair and reasonable to consider the circumstances Mr and Mrs J were in when deciding what should be expected of both them and Lloyds, and ultimately what level of deduction is fair. Having carefully weighed everything up, I don’t agree Mr and Mrs J fairly hold the same level of responsibility for what happened as Lloyds. Mrs J was quite suddenly placed in a position of managing a significant amount of funds on behalf of her family. She had to do this largely independently – whilst also dealing with her own health issues and helping care for family members who needed substantial support. That understandably placed a lot of strain on Mrs J, and I can see why she felt pressured to act to try and keep the funds safe. It’s also clear the scammers built up trust with her – and I can see why, to someone in her circumstances, their communications generally seemed professional and legitimate. As above, I do think Mrs J missed some warning signs. But I also think she was in circumstances that rendered her susceptible to this scam, and which made it more difficult for her to spot the indicators that the investment wasn’t genuine. By contrast, Lloyds had knowledge of scams like this – as well as the opportunity to discuss and check what Mrs J was doing in branch. I’ve thought carefully about Lloyds’ arguments. But overall, I’m not persuaded a 50% liability split fairly reflects Mr and Mrs J’s level of contributory negligence in the circumstances. Instead, I think a reduction of 25% to their compensation would be a more appropriate reflection of their role in what happened. Putting things right To put things right, Lloyds Bank PLC should pay Mr and Mrs J £401,630.91, constituting the difference between what it has already refunded (£548,119.30) and 75% of their loss due to the scam (£949,750.21 – from a total loss of £1,266,333.61, factoring in the credit paid by the scammer and the fees charged on the payments).

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Lloyds Bank PLC should pay 8% simple interest per year on this amount, running from the dates of payment to the date of settlement. This is to compensate Mr and Mrs J for the loss of use of these funds. If Lloyds Bank PLC considers that it’s required by HM Revenue & Customs to deduct any income tax from that interest, it should tell Mr and Mrs J how much it’s taken off. It should also give them a tax deduction certificate if they ask for one, so they can reclaim the tax from HM Revenue & Customs if appropriate. My final decision For the reasons given above, my final decision is that I uphold this complaint and direct Lloyds Bank PLC to put things right in the way I’ve set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr and Mrs J to accept or reject my decision before 13 April 2026. Rachel Loughlin Ombudsman

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