Santander UK Plc · DRN-5941186

The complaint Mr M is unhappy that Santander UK Plc won't refund money he lost as a result of a scam. What happened The background to this complaint is familiar to both parties – and has been set out in detail by our Investigator - so I’ll only refer to some key events here. In 2019 Mr M was looking for investment opportunities and came across a business I’ll call ‘S’. It was offering a fixed-rate bond, with the underlying investments to be made in property development. In August 2019 Mr M made a £20,000 payment to an intermediary company, that I’ll refer to as ‘A’, which at the time was FCA authorised. Mr M’s funds were to be passed from A to S. Mr M received some monthly returns (totalling £2,700), but these soon stopped and Mr M realised S had gone into liquidation. Believing he’d been scammed, Mr M contacted Santander for help recovering his losses. While awaiting an outcome of his reimbursement claim, Mr M made a number of complaints about Santander’s handling of the issue. Santander investigated Mr M’s complaint and in doing so considered whether he was entitled to reimbursement under the Lending Standards Board’s Contingent Reimbursement Model (CRM) Code. It said he wasn’t entitled to reimbursement as it considered his loss arose from a civil dispute, as his payment had gone to A, an FCA authorised firm. It said the CRM Code didn’t apply, and there were no other grounds on which it would refund Mr M. Unhappy with Santander’s response, Mr M referred his complaint to the Financial Ombudsman. One of our Investigators looked into things and upheld the complaint. She was satisfied that whilst the payment had gone to A - who was not a party to the fraud - Mr M had nevertheless lost control of the funds as soon as he made the transfer to A, as it was acting solely on S’s behalf. She therefore recommended that Santander refund Mr M’s loss plus 8% interest from the date Santander ought to have accepted his claim. She also recommended that it pay Mr M £150 to compensate him for the distress and inconvenience it caused by its poor handling of his claim. Santander disagreed. It maintained its position that Mr M’s payments weren’t covered by the CRM Code, and that Mr M could raise a claim with the Financial Services Compensation Scheme (‘FSCS’) to recover his loss. It was not persuaded it had been properly evidenced that Mr M did not have a customer relationship with A, or that he had lost control of his funds at the point he made his payment to A. It said without evidence of malpractice from A, it considered this to be a civil dispute. Mr M broadly agreed with the outcome but asked for clarification on when interest would be payable. He noted that Santander had been aware that S was operating a scam prior to him raising a claim, he therefore considered interest could be payable from an earlier date. Prior to reaching my final decision, I contacted Santander to explain why I was minded to

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reach a similar outcome to our Investigator. I explained why I was satisfied Mr M was entitled to reimbursement under the CRM Code. I also explained that having received further clarification from Mr M about his service concerns, I considered Santander should pay him £400 compensation. Santander reiterated that it did not consider it was liable to reimburse Mr M under the CRM Code and considered that Mr M should attempt to recoup his losses via the FSCS. It made no comment on the increased compensation award. As there has been no agreement, it is now for me to reach 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. Having done so, I am upholding this complaint for substantially the same reasons set out by our Investigator, which I will summarise or expand upon where relevant. In broad terms, the starting position at law is that a Bank is expected to process payments and withdrawals that a customer authorises it to make, in accordance with the Payment Services Regulations and the terms and conditions of the customer’s account. However, where the customer made the payment because of the actions of a fraudster, it may sometimes be fair and reasonable for the Bank to reimburse the customer even though they authorised the payment. The CRM Code Santander was a signatory to the voluntary CRM Code, and so was required to reimburse customers who had been the victims of authorised push payment (‘APP’) scams in all but a limited number of circumstances. The CRM Code defines an APP scam as: “…a transfer of funds…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.” DS1(2)(a)(ii) Santander does not appear to dispute that S was operating a scam, nor has it challenged that Mr M has suffered a loss as a result of S’s actions. As such, I will not address this point in detail, save to say, that I am satisfied based on the available evidence, and for the reasons set out in detail by our Investigator, that S was operating a scam, and that Mr M’s funds were ultimately obtained for fraudulent purposes. Santander’s main point of contention – which will be the focus of this decision - is that Mr M is not entitled to reimbursement under the CRM Code because he made his payment to A, which at the time was an FCA authorised firm. But I disagree. The CRM Code does not require the initial recipient of a payment to be an account owned by and for the benefit of the fraudster. Neither does it require that account to be controlled by a party which is complicit in the fraud. If it did, many APP scams involving intermediary or mule accounts would fall outside scope, which is not consistent with the wording or spirit of the Code.

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Instead, the relevant test is whether an APP scam has taken place. In this case, I’m satisfied the payment meets the definition of an APP scam under DS1(2)(a)(ii) in that Mr M transferred his funds to another person (S) for what he believed was a legitimate purpose but which was in fact fraudulent. Specifically, Mr M believed that he was making a payment as part of a legitimate investment scheme but, in fact, he was being defrauded. There is no evidence to suggest Mr M had a customer relationship with A, and indeed the available evidence suggests he did not. Mr M received his instruction to pay A in an email from S, which referred to A as “our Receiving agent”. This persuades me A was acting on behalf of S and not Mr M. As such I’m satisfied that the money was out of Mr M’s control as soon as he made his payment to A, and so it follows that I consider the payments are covered by the provisions of the CRM Code. I think it is important to highlight that while I have carefully considered the individual circumstances of this complaint in reaching this decision, this point has been considered more broadly by the Financial Ombudsman Service and we have consistently explained why we consider the CRM Code applies in circumstances such as this. Based on all the evidence currently available, I’m satisfied this claim meets the definition of an APP scam, as per the CRM Code. There is therefore a rebuttable presumption that Santander should refund Mr M's losses in full. Do any exceptions to reimbursement apply here? Santander has presented no evidence that it provided Mr M with an effective warning at the time he made his payment to A. As such, it could not reasonably exclude Mr M’s claim on the basis that he ignored an effective warning. Santander also hasn't demonstrated that Mr M lacked a reasonable basis for believing the investment scheme was legitimate. And I believe it's unlikely it would be able to do so given the sophistication of the scam. The involvement of seemingly genuine companies, some of which were FCA authorised, would understandably have made the scam very convincing and the investment scheme appear genuine. As no exceptions to reimbursement can be fairly applied, it can be concluded that Santander ought to have refunded Mr M when he raised his scam claim. It’s then fair and reasonable that it now compensates him to that effect. Are there other remedies available to Mr M? Santander has argued that Mr M should pursue a claim with the FSCS. It states the FSCS has confirmed it will accept claims against A. It is true that the FSCS will consider some claims against A. But not all companies that used the intermediary are to be covered; some are excluded. There’s nothing the FSCS has published to say claims linked to S will be included. The Insolvency Service has also publicly stated that the activity S was engaged in was not FSCS protected, setting that out as one of the frequent deceptions S carried out, in that it lied to investors about being covered. But in any event, as far as I’m aware Mr M has not made a claim to it about A and the fact the FSCS are considering these claims does not prevent Mr M from recovering his loss from Santander.

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Customer service Mr M has outlined a number of concerns about how Santander handled his claim for reimbursement, and the impact these failings have had on him. Mr M has evidenced a litany of errors with the handling of his claim since he first reported the APP scam to Santander, which have included: • Initially failing to acknowledge or deal with his complaint, which resulted in delays in him receiving an answer and believing that his documents had been lost. • Repeatedly failing to provide callbacks when promised, which compounded his frustration and upset at how his complaint was being handled. • An inconsistent and confusing response to his various service complaints. For example, there were some instances where complaints were closed or withdrawn without Mr M’s knowledge and without anything being put in writing. • A refusal to answer questions or explain why his complaint was not progressing. Mr M has told us that he has spent a significant amount of time trying to progress his complaint with Santander and needed to constantly chase it, which he said led to significant upset, which impacted both his physical and mental health. Taken together, these failings caused significant and avoidable distress and inconvenience at an already highly stressful time. In these circumstances I consider Santander should pay Mr M £400 compensation. Interest Lastly, Mr M has asked whether Santander should be required to pay interest from an earlier date, as he believes it ought to have been aware that S was operating a scam before he raised a claim. While I understand Mr M’s point, I would only expect Santander to consider whether it was required to reimburse a scam loss once he actually raised a claim, which he first did on 20 November 2024. However, in line with the CRM Code’s requirement that firms make a reimbursement decision without undue delay - and in any event no later than 15 business days after the day on which the customer reported the APP scam - I think it’s reasonable for interest to be added from that point. Putting things right Santander should now: • Refund the £17,300 Mr M lost to the scam (£20,000 payment minus £2,700 he received back as returns); • Pay interest on that sum at 8% simple per year, calculated from 20 November 2024 (15 business days after Mr M first reported the APP scam) to the date of settlement, (less any tax lawfully deductible). • Pay £400 compensation for the impact of its customer service failings. My final decision I uphold this complaint against Santander UK Plc and direct it to settle the complaint in the

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way outlined above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 23 April 2026. Lisa De Noronha Ombudsman

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