HSBC UK Bank Plc · DRN-6238227

The complaint Mr H and Mr H2 complain that HSBC UK Bank Plc did not reimburse the funds they lost to an investment scam. Mr H was the main party to the investment, so I will mainly refer to him throughout this decision. What happened All parties are aware of the circumstances of the complaint, so I won’t repeat them again in detail here. In summary, Mr H found an investment opportunity with a company I’ll refer to as ‘B’ and agreed to invest £100,000 from his joint account with Mr H2. When he received no returns, B went into administration, and there was a police investigation into B, Mr H felt he had been scammed. HSBC provided a final response letter explaining they felt this was a failed investment and therefore was a civil dispute and not a scam. The case was passed to our service and our Investigator looked into it. However, they did not think they had sufficient evidence to show the £100,000 that Mr H used to fund the investment belonged to Mr H and Mr H2, as this was credited into the joint account a few months prior. So they did not think they could safely say Mr H and Mr H2 had suffered a loss in the circumstances. Mr H and Mr H2 disagreed with the outcome and provided additional information about the agreement they had with the individual who sent them the £100,000 that was used to fund the investment, as well as additional evidence relating to the investment itself. I issued a provisional decision in which I felt the complaint should be upheld. It read as follows: I have firstly considered the additional information relating to the source of funds. Within this is the original loan agreement between Mr H and the individual that lent him the funds. While the agreement does not specify what the purpose of the loan was, it does make it clear that the individual expected the loan back with interest. Mr H has also provided communication between himself and the individual where he is chased for a return of the funds, as well as an update from November 2025 on the status of the loan and what debt was outstanding. He has also provided written confirmation from the individual that he has not sought reimbursement of the loss from his own bank account provider. Based on what I have seen so far, I think it is more likely the loss lies with Mr H and that he now owes these funds to the individual who lent him them. I am therefore satisfied that I can now go on to consider the investment itself in more detail. 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. In broad terms, the starting position at law is that a bank such as HSBC is expected to process payments and withdrawals that a customer authorises it to make, in accordance with the Payment Services Regulations (in this case the 2017 regulations) and the terms and conditions of the customer’s account. In law, Mr H and Mr H2 are responsible for payments they have authorised. Have Mr H and Mr H2 been victims of an APP scam as defined by the CRM Code?

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HSBC has signed up to the CRM Code, which provides protection to scam victims. Under the CRM Code, the starting principle is that a firm should reimburse a customer who is the victim of an APP scam in all but a limited number of circumstances. The CRM Code applies to APP scams which are defined as: (a) …a transfer of funds executed across Faster Payments…where: (i) The Customer intended to transfer funds to another person, but was instead deceived into transferring the funds to a different person; or (ii) The Customer transferred funds to another person for what they believed were legitimate purposes but which were in fact fraudulent. To decide whether Mr H and Mr H2 are the victims of an APP scam as defined in the CRM Code I have considered: - The purpose of the payments and whether Mr H thought this purpose was legitimate. - The purpose the recipient (B) had in mind at the time of the payments, and whether this broadly aligned with what Mr H understood to have been the purpose of the payments. - Whether there was a significant difference in these purposes, and if so, whether it could be said this was as a result of dishonest deception. Mr H thought the funds would be used for general investment purposes as part of a loan agreement. I haven’t seen anything to suggest that he didn’t consider these purposes to be legitimate. I’ve gone on to consider what purpose B had in mind and whether it was in line with what Mr H thought. Broadly, B received around £28m in investment capital from investors with loan agreements or managed funds agreements. Of that £28m, less than 17% was invested with around £4.1m being returned. This indicates a huge trading loss, yet around £19m was paid out to investors. Overall, I think it more likely than not that B operated a Ponzi scheme. Mr H was offered rates of return of around 40%. There is no evidence to demonstrate that B was successfully trading and was able to generate such substantial profits. B also wasn’t regulated by the FCA as it needed to be to undertake the activities claimed. As a private investment fund, B should not have solicited investments from retail investors or the general public as it did. Having carefully considered all the evidence, I’m of the opinion that B weren’t using investor funds for the purpose in which they were intended, and this demonstrates that they weren’t the “legitimate supplier” of a service. I think their conduct went beyond simply misleading investors about a genuine investment opportunity and that the real purpose of the payments received was different to what Mr H and other investors were led to believe – and this was through deception. Application of the CRM Code The CRM Code says that Mr H and Mr H2 are entitled to a full refund unless HSBC can establish that an exception to reimbursement applies. Under the CRM Code, a bank may choose not to reimburse a customer if it can establish that: • The customer made payments without having a reasonable basis for believing that the payee was the person the customer was expecting to pay; the payment was for genuine goods or service; and/or the person or business with whom they transacted was legitimate. • The customer ignored effective warnings, by failing to take appropriate action in response to such an effective warning.

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There are further exceptions outlined in the CRM Code, but they don’t apply to this case. Did Mr H have a reasonable basis for believing the investment was genuine? Having carefully considered the evidence I’m not persuaded HSBC could fairly apply this exception to reimbursement for the following reasons: - Mr H was introduced to the investment opportunity by an individual he had met online, who had been successfully investing with B for around a few years at that point and had received regular returns on their investment. They knew the directors personally and lived nearby and I don’t think he had any reason not to trust what the individual was telling him. - Mr H visited B’s office before deciding to invest and met the directors, who appeared to be knowledgeable and professional. He watched them carry out trades live and based on what he saw it all seemed legitimate to him. - Mr H viewed B’s website, and also reviewed brochures and other promotional literature and he signed an agreement with B that all appeared legitimate. I therefore currently think it is more likely Mr H had a reasonable basis to believe the investment was legitimate. It is arguable in this case that HSBC couldn’t have provided a warning that was effective and would have prevented Mr H from going ahead in the circumstances of this particular scam. But this doesn’t change HSBC’s overall position here, as whether any reimbursement is due is then dependent on if any other exceptions apply, and I do not think they do. Mr H and Mr H2 responded and agreed with my provisional findings. HSBC responded and said they disagreed with the outcome and felt they were entitled to rely on R3(1)(c) to pause an outcome. They also felt this was best classed as a civil dispute. In addition, they did not think Mr H had a reasonable basis to believe the investment was genuine. 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. I have considered HSBC’s comments as a whole and in doing so I find that they are quite contradictory. Firms generally have 15 business days to respond to claims under the CRM Code. HSBC initially declined Mr H’s claim on the basis of the matter being a civil dispute rather than a scam. HSBC has now attempted to apply R3(1)(c) of the CRM Code, which says: if a case is subject to investigation by a statutory body and the outcome might reasonably inform the Firm’s decision, the Firm may wait for the outcome of the investigation before making a decision. However, this provision relates to delaying a decision under the CRM Code – whereas HSBC had already declined Mr H’s scam claim because they felt it was a civil dispute. So, I don’t think it can retrospectively use R3(1)(c) as a reason to delay giving an answer. HSBC have then gone on to argue again that this is a civil dispute that has been ‘artificially shoehorned into the CRM Code definition of a scam’. For the reasons set out in my provisional decision, I do not agree that the payments meet the definition of a civil dispute. Instead, I think they meet the definition of an APP scam. More specifically, I think it is more likely B was operating a Ponzi scheme. I have explained this in more detail in the provisional decision set out above and I see no reason to repeat it.

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HSBC has then gone on to argue that Mr H did not have a reasonable basis to believe the investment was genuine, which is an exception to full reimbursement for authorised push payment scams under the CRM Code. This was due to the returns being too good to be true, that only 10% of funds were at risk and that B were not authorised by the FCA. I have already set out in the provisional decision why I feel Mr H did have a reasonable basis to believe the investment was genuine, even considering the red flags highlighted by HSBC. The individual that introduced Mr H to the investment had already been successfully receiving returns and they knew the directors personally, which added an air of legitimacy to the investment. Mr H was able to visit the actual offices and meet the individuals that worked there, including the directors. At this time, he was also able to watch them carry out trades and I can understand why this would further convince them that the operation was legitimate. I also have to consider that it took professional organisations forensically looking into the way B operated after it entered administration for the scam to come to light, so I can understand why an individual such as Mr H did not uncover the Ponzi scheme himself. On balance, having carefully considered everything available to me, I am satisfied that Mr H had a reasonable basis to believe the investment was genuine, despite the red flags highlighted by HSBC. Redress and calculation As there is an ongoing police investigation, it’s possible Mr H and Mr H2 may recover some further funds in the future. In order to avoid the risk of double recovery, HSBC is entitled to take, if it wishes, an assignment of the rights to all future distributions under the liquidation process in respect of the investment before paying the award. If the bank elects to take an assignment of rights before paying compensation, it must first provide a draft of the assignment to Mr H and Mr H2 for their consideration and agreement. I calculate Mr H’s outstanding loss from the payment to be £100,000. HSBC should also add 8% simple interest from 15 days after the claim was received to the date of settlement. My final decision I uphold this complaint and direct HSBC UK Bank Plc to pay the redress outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr H and Mr H to accept or reject my decision before 16 April 2026. Rebecca Norris Ombudsman

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