Starling Bank Limited · DRN-6027659

The complaint A limited company, which I’ll refer to as ‘AM,’ complains that Starling Bank Limited (‘Starling’) hasn’t reimbursed the money it lost to an authorised push payment (‘APP’) scam. Mrs M and Mr F, who are directors of AM, bring the complaint on AM’s behalf. What happened Mrs M told us she followed a company known for sourcing property deals for investors for a number of years – whom I’ll refer to as ‘F.’ Mrs M’s told us she made a personal investment in a different but similar investment opportunity after being introduced by F. Believing all to be well with that investment, Mrs M spoke with Mr F, and they decided to invest in a company I’ll refer to as ‘C’ whom they were also introduced to by F. In brief, C was claiming to offer investments in specific property units on the understanding they would be refurbished and rented out for social housing through councils and housing authorities who they held contracts with. C also claimed this was a “government-backed scheme.” Believing all to be genuine, Mrs M and Mr F decided to invest on AM’s behalf – they paid C £13,000 from AM’s account on 20 August 2024. Mrs M and Mr F expected that AM would receive monthly returns of £600 on its investment from around November 2024 for 36 months. AM say no returns have been received, and C is now subject to an ongoing police investigation. Mrs M and Mr F contacted Starling to report that AM had been scammed – arguing that AM should be reimbursed under the provisions of the Lending Standards Board’s Contingent Reimbursement Model (‘CRM Code’). Starling informed AM that under the CRM Code, both it and the receiving bank had met the requirements to effectively protect AM from the scam. It said AM had failed to meet these requirements, meaning that sufficient steps had not been taken to ensure the legitimacy of the investment prior to sending the funds. It followed that Starling said it wouldn’t be reimbursing AM. However, it paid AM £175 compensation in relation to the service AM received. Unhappy with this response, Mrs M and Mr F referred a complaint to this Service on AM’s behalf. Our Investigator upheld it. They considered the payment AM made under the CRM Code and didn’t think Starling had been able to establish that AM didn’t have a reasonable basis for believing it was entering into a legitimate property investment. She concluded AM was entitled to a full refund under the CRM Code and that Starling should also pay AM interest to compensate for the delay in refunding its financial loss. Mrs M and Mr F accepted our Investigator’s findings on AM’s behalf, but Starling appealed. In summary, it raised that our Investigator’s view didn’t refer to the warnings it provided. Starling said it provided sufficient warnings for the payment. It reiterated that it doesn’t consider Mrs M and Mr F had a reasonable basis for belief - on the basis that they didn’t check the Financial Conduct Authority (‘FCA’) register and that the interest rate was unrealistic and should have raised concerns.

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Our Investigator considered Starling’s further comments but explained her view remained unchanged. She didn’t think any warnings would have raised concerns with AM due to the legitimate appearance of C at the time of the payment. She felt given the strength and plausibility of the materials provided by C and F, she didn’t think this would’ve raised concerns about the investment it was making. As Starling didn’t agree, the complaint has now been passed to me to decide. 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. Having done so, I’ve decided to uphold it for the following reasons. Mrs M and Mr F authorised the disputed payment on AM’s behalf. The starting position in law is that AM is liable for it. But Starling was signatory to the CRM Code at the time of the payment – under which firms are generally expected to refund victims of APP scams. While I note that in Starling’s earlier communication with AM it commented that it couldn’t provide an outcome to the claim due to the complex circumstances surrounding the scam and the need for further information from the police investigation, it went on to explain that under the CRM Code, both it and the receiving bank had met its requirements to effectively protect AM for the scam. However, Starling said it didn’t consider AM had met these requirements – in other words, Starling didn’t consider AM had a reasonable basis for belief when making the payment. With this in mind, I’m satisfied it isn’t disputed that AM fell victim to an APP scam. But for the avoidance of doubt, based on the information our service already knows about C, I’m also satisfied there is sufficient evidence that the disputed payment meets the CRM Code’s definition of an APP scam. The available information shows little to suggest that any transactions are consistent with C completing property development for the benefit of investors, and much more to suggest that C wasn’t using investors’ funds for the intended purpose. Even if any of the funds C received were used for property development, it seems likely this was done with the intention of encouraging further investment as part of an overall scam. For these reasons, I’m satisfied that the disputed payment meets the CRM Code’s definition of an APP scam. The starting position under the CRM Code is that a firm should refund victims of APP scams – as I’m satisfied AM was. However, there are some exceptions under the rules which, if applicable, firms can rely on to decline reimbursement. Of relevance here is that firms can choose not to reimburse a customer if they ignored an effective warning the firm gave them during the payment journey, or if they made the payment without having a reasonable basis for believing that the payee was the person they were expecting to pay; the payment was for genuine goods or services; or the person or business with whom they transacted was legitimate. There are further exceptions within the CRM Code, but they aren’t relevant here. For the reasons given by our Investigator, I’m persuaded that Mrs M and Mr F had a reasonable basis for believing C offered a genuine investment opportunity. I’ve seen that they were given professional and convincing paperwork - a contract setting out the agreement reached, an investment payment schedule, a payment invoice, and a certificate of investment. As such, the paperwork received and signed by AM was what you might expect with a genuine investment.

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I’m also mindful that Mrs M and Mr F were introduced to C by F – whom was a company known for sourcing property deals for investors. It seems F had a professional and established reputation in property resourcing and, Mrs M had already been following F and had personally invested in an earlier investment opportunity. One, that she was receiving returns on at the time AM made this payment. Further, they were reassured by the claim that C was government-backed. C was also registered on Companies House and Mrs M has said that the name/signature on the contract agreement matched an individual shown on Companies House at the time. And, whilst Starling has suggested that Mrs M and Mr F could have completed further due diligence, there weren’t obvious public concerns about C at the time. So, it's not clear what material impact that would have had on preventing the scam – which is something firms are expected to consider when seeking to apply an exception. Overall, although there may well have been more checks Mrs M and Mr F could’ve carried out, I think it was reasonable for them to believe in the legitimacy of the investment opportunity in the circumstances, and I’m not persuaded that any of the additional checks Mrs M and Mr F could’ve carried out would’ve caused them concern. I’ve looked at the questions Starling asked Mrs M and Mr F and the warnings it gave them during the payment journey. Having done so, I’m not persuaded that an effective warning, which meets the criteria set out by the CRM Code, was given. I say this because, the payment flow questions presented to them by Starling were very generalised and didn’t give clear advice about the actions Mrs M and Mr F needs to take to address the risk. And, while Starling has said that it’s warnings prompted Mrs M and Mr F to check the FCA register, this in itself doesn’t demonstrate that Starling provided them with an effective warning. Further, I don’t think C’s absence from the register would’ve made it clear it was operating a scam. It’s not clear that the type of investment C was offering (providing social housing) would’ve required regulation. The information Starling has said Mrs M and Mr F would’ve seen if they’d checked the FCA register also doesn’t say that any company that’s not on the register is a scam; it sets out several potential reasons why a company might not be listed, including that the FCA may not regulate the product or service the company is offering. It follows, I’m not satisfied Starling provided an effective warning and so I can’t say Mrs M and Mr F ignored such a warning. Further, as set out by our Investigator, in the circumstances of this case, I’m also not persuaded that had an effective warning been given (not a finding I’ve made here), that this would’ve had a material effect on preventing the APP scam. For the reasons I’ve explained above, I’m not persuaded Mrs M and Mr F had reason to believe C wasn’t a genuine investment opportunity at the time. I think it’s fair to say that a warning wouldn’t have had a material effect on preventing the scam, such was AM’s belief that things were legitimate. So, I do not think an exception to reimbursement can be applied for this reason in any event. Given that I’m not satisfied that Starling can rely on an exception to reimbursement, Mrs M and Mr F are entitled to be reimbursed in full under the provisions of the CRM Code. Putting things right • To put things right, Starling Bank Limited should refund AM’s payment to C - £13,000. • Starling should also pay 8% simple interest per annum on this amount, from the date it declined the claim or 15 days after the claim was first made, whichever is earlier.

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This is to compensate AM for the loss of use of these funds from the point at which it should have been refunded. • If Starling considers that it’s required by HM Revenue & Customs to deduct any tax from that interest, it should tell Mrs M and Mr F how much it’s taken off. It should also give Mrs M and Mr F a tax deduction certificate if they ask for one, so they can reclaim the tax (on behalf of AM) from HM Revenue & Customs if appropriate. • In order to avoid the risk of double recovery, Starling is entitled to take (if it wishes) an assignment of the rights to all future distributions in relation to the scam payment we’re upholding that arise (such as from the police investigation and criminal proceedings), before paying the award. If Starling elects to take an assignment of rights before paying compensation, it must first provide a draft of the assignment to Mrs M and Mr F for their consideration and agreement. My final decision For the reasons I’ve explained, my final decision is that I uphold this complaint and instruct Starling Bank Limited 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 AM to accept or reject my decision before 24 April 2026. Staci Rowland Ombudsman

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