NATIONAL WESTMINSTER BANK PUBLIC LIMITED COMPANY · DRN-5641808

The complaint Mr T complains that NATIONAL WESTMINSTER BANK PUBLIC LIMITED COMPANY (“NatWest”) has not reimbursed the funds he lost to a scam. What happened Mr T received a phone call in 2017 from an individual I will refer to as SA. SA said he was a colleague of a stockbroker who Mr T’s father had been a client of. Mr T began speaking with SA and built a friendship with him, and he invested in a number of the companies SA introduced him to, which benefitted from the HMRC’s Enterprise Investment Scheme (EIS) and gave tax breaks to investors. SA introduced Mr T to a company I will refer to as ‘BB’ in January 2019, and by that time Mr T had already invested in two other companies SA had introduced him to. He made the following payments from two separate accounts he held with NatWest: Date Amount 14/01/2019 £50,000 15/01/2019 £50,000 16/01/2019 £50,000 17/01/2019 £25,000 04/04/2019 £36,000 07/04/2020 £20,000 Mr T did receive payments in from BB, however these were rental payments to Mr T. This is because the director of BB rented Mr T’s apartment for some time on behalf of some acquaintances. However, when the tenants were asked to leave after nonpayment of rent and Mr T found the apartment in a bad state of repair, he looked into the companies he had been investing in and found adverse information online about them and the individuals who owned them. He found an article from a financial journalist who had uncovered some of them as ‘boiler room scams’ and also became aware of a police investigation into some of the companies, including BB. Mr T raised a scam claim with NatWest for the payments made to BB, as well as other investments he made. NatWest said that they felt it was reasonable to await the outcome of the police investigation before they provided a full response. Our Investigator looked into the complaint and explained that the 2019 payments were not covered by the Lending Standards Board’s Contingent Reimbursement Model (“CRM”) Code, as they were made before the inception of the code on 28 May 2019, and it was not retrospective. And for the final payment, they explained that they felt it was reasonable for NatWest to rely on Clause R3(1)(C) of the CRM Code, which allowed NatWest to await the outcome of the police investigation before reaching an outcome. The Investigator felt that the initial payment of £50,000 was unusual enough when compared to the genuine account activity that NatWest should have intervened and asked more questions about it. However, they felt it was unlikely that an intervention would have prevented Mr T from carrying on with the payments or making further ones. This was because the investment itself was backed by the EIS which would have held weight with NatWest, and Mr T thought SA had worked with someone his father had been a client of. So,

-- 1 of 4 --

they did not think it was a case where NatWest should have gone against Mr T’s instructions and refused to process the payments. Mr T disagreed with the findings and felt the police investigation indicated he was the victim of a scam. He highlighted that other consumers had received refunds from other investment companies linked to the investigation. As an informal agreement could not be reached, the complaint has been passed to me for a final decision. 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. In deciding what’s fair and reasonable in all the circumstances of a complaint, I’m required to take into account relevant: law and regulations; regulators’ rules, guidance and standards; codes of practice; and, where appropriate, what I consider to be good industry practice at the time. While these will all form the basis of my reasoning, I may not specifically name each rule or regulation and explain specifically how they relate to my reasoning unless I feel it is necessary. I have firstly considered the payment of £20,000 made to BB on 7 April 2020. It has already been explained to Mr T that this payment did not reach BB, and I can see on his statement that the faster payment of £20,000 was rejected the same day it was attempted. I therefore have not considered this payment further. It should be noted that the remaining payments are not covered by the CRM Code, as they pre-date the inception of the code which is not retrospective. Broadly speaking, the starting position in law is that an account provider is expected to process payments and withdrawals that a customer authorises it to make, in accordance with the terms and conditions of the account. And a customer will then be responsible for the transactions that they have authorised. It’s not in dispute here that Mr T authorised the payments in question as he believed they were part of a legitimate investment opportunity. So, while I recognise that he didn’t intend the money to go to scammers, the starting position in law is that NatWest was obliged to follow Mr T’s instruction and process the payments. Because of this, he is not automatically entitled to a refund. The regulatory landscape, along with good industry practice, also sets out a requirement for account providers to protect their customers from fraud and financial harm. And this includes monitoring accounts to look out for activity that might suggest a customer was at risk of financial harm, intervening in unusual or out of character transactions and trying to prevent customers falling victims to scams. So, I’ve also thought about whether NatWest did enough to try to keep Mr T’s account safe. I can see that Mr T sent the payments from two separate accounts. The initial payment of £50,000 was a high value payment. I can see that on the account Mr T made this payment from, he had made a number of high value transfers, some of which were higher in value that the payment in question. However, these were transfers to other NatWest accounts in his name. The payments on the account that went to external accounts were generally lower in value when compared to the £50,000 payment. With this in mind, I think the £50,000 payment was unusual enough that it warranted an intervention from NatWest. There is no specific set of questions we would expect a bank to ask when intervening in an unusual payment. But we would generally expect them to ask the purpose of the payment, who it is going to and what the consumer understands about what they are paying for. If any of the answers reasonably raise concerns, we would expect the bank to go further to ensure their customer is not at risk of financial harm, and if there is a strong indication they are

-- 2 of 4 --

falling victim to a scam, the bank should provide clear warnings and if necessary, refuse to process a payment. I’ve thought about what was known about BB at the time, how Mr T was introduced to the investment opportunity and what he understood about the company and the investment. I can see that BB was incorporated on Companies House in 2016, and Mr T was told they were a technology consultancy that also dealt with financial mis-selling. The investment was backed by the HMRC’s EIS, and I think this alone would have given a significant level of legitimacy to both the company and the investment in NatWest’s eyes. Based on what was known at the time, BB appeared to be a legitimate company. I’ve also considered that the investment was introduced to Mr T by SA. Mr T has specifically said he should have been asked by NatWest whether or not SA was regulated by the Financial Conduct Authority (“FCA”) to introduce investments to individuals, and if he had been asked this he would not have carried on with the investments. While I do not have documents from BB from the time Mr T first invested, I have seen a letter confirming his shares which was sent on 21 January 2020. This is signed by SA and it states that he was a founding partner of BB. By January 2019, Mr T had known SA for over a year, met him in person, built up a friendship and invested in two other companies SA introduced him to. He had also received £20,000 in returns from a previous investment he had made through SA as well as £212,000 in tax rebates from an earlier investment introduced by SA that was also backed by the HMRC EIS. Considering all of this, I think it is unlikely Mr T would have viewed SA as an independent financial advisor, and I think it is more likely he saw him as an acquaintance who was involved in some companies that Mr T could invest in and benefit from tax breaks from due to the EIS. So, I think it is unlikely that even if Mr T had been asked about who introduced him to the investment that it would have raised concerns at the time. Considering all of this, it is difficult to agree that a detailed conversation with Mr T would have revealed any concerns about BB’s operation or any indication that they could be operating as anything other than a higher risk investment. I acknowledge Mr T has been advised that NatWest should have looked over the receiving bank statements. Firstly, as the receiving account was held with a separate bank, NatWest would not have access to these. They could inform the receiving bank if they reasonably had concerns Mr T was the victim of fraud, but as explained above I don’t think this is likely based on what was known about BB at the time. On balance, having carefully considered everything available to me, I do not think NatWest would have refused to process the payment, contrary to Mr T’s request or that Mr T would have changed his mind about continuing with the investment. I do appreciate that since Mr T made the initial investment, SA has become an interested party in a police investigation, that includes some other investments Mr T became involved in, including BB. I understand that for Mr T, this strongly brings into question the legitimacy of his investment with BB and leads him to think he has been the victim of a scam. However, as this investigation began sometime after Mr T made the payments in late 2019 and 2020, it does not have a bearing on any intervention by NatWest at that time. Mr T has also argued that he was vulnerable at the time of the payments and that NatWest should have considered this. As these payments are not covered by the CRM Code, we would only expect a bank to take into consideration vulnerabilities it was reasonably aware of at the time the payments were made. At the time of the payments, Mr T was around 71 years old, so was not what the FCA would consider as ‘older old’. And I can’t see that NatWest was specifically aware of any other vulnerabilities that could reasonably have affected Mr T’s decision to make the payments to BB. I therefore do not think NatWest needed to take additional steps to safeguard Mr T in light of these vulnerabilities. So, for the reasons set out above, while I think NatWest should have intervened as early as the first payment Mr T made to BB, I do not think an intervention at that time would have

-- 3 of 4 --

prevented the payments from being made. So, I do not think NatWest now needs to reimburse Mr T in the circumstances. Mr T has mentioned that some individuals have been refunded by other banks for investments linked to the police investigation. I do not have any details about these and in any event, I have to consider each case on its own individual merits. Having done so, for the reasons outlined above, I do not think NatWest needs to reimburse Mr T. My final decision I do not uphold Mr T’s complaint against NATIONAL WESTMINSTER BANK PUBLIC LIMITED COMPANY. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr T to accept or reject my decision before 28 April 2026. Rebecca Norris Ombudsman

-- 4 of 4 --