Starling Bank Limited · DRN-6260602

The complaint Mr M complains that Starling Bank Limited won’t reimburse him after he fell victim to an investment scam. What happened On 18 March 2026, I issued my provisional decision on this complaint. I wanted to give both parties a chance to provide any more evidence and arguments before I issued my final decision. That provisional decision forms part of this final decision and is copied below. Mr M has explained that he was introduced by a friend to what they both believed was a genuine investment in foreign exchange, via a company I’ll refer to as ‘V’. Mr M was convinced of the firm’s legitimacy as he was recommended to it by a friend he considered to be successful and have a good mind for business, who had shown him the returns they were making, and knew of a number of other friends who were also investing. He’d also been reassured that the platform it used appeared professional and had legal support. Encouraged by what he had heard, Mr M made a payment of £20,000 from his Starling account, directly to the personal account of V’s ‘trader’. Mr M says he became aware he may have fallen victim to a scam when a warning was presented by the Financial Conduct Authority on V’s website, confirming the owners were under investigation. Believing he’d fallen victim to a scam, Mr M contacted his banking provider, Starling, to raise a claim. Starling considered Mr M’s claim but didn’t uphold it. It said that it met its requirements under the Contingent Reimbursement Model (CRM) Code, which was in place at the time the payment was made, and that Mr M failed to meet his own requirements. However, it did award Mr M with £100 compensation to acknowledge that it took longer to consider Mr M’s complaint than Mr M had initially been advised of. Mr M disagreed and referred his complaint to our service. An investigator considered Mr M’s complaint and upheld it in part. He said that when making the payment, Starling posed questions through its app about it and Mr M confirmed he was making the payment to friends or family for a gift. The Investigator considered that based on what Starling knew, it wouldn’t have been apparent that Mr M was falling victim to a different type of scam. However, he also thought Mr M had a reasonable basis for believing he was making a legitimate payment at the time he made the transfer. The Investigator therefore thought it was reasonable for liability for Mr M’s losses to be shared equally between himself and Starling – with Starling reimbursing him 50% of the payment made. Both parties disagreed with the Investigator’s view. Starling highlighted that it didn’t consider any warning or intervention would have uncovered this scam, as had it called Mr M to discuss the payment, he likely wouldn’t have told it about anything investment related. Mr M considered that a full refund should be provided, based on other scam victims who he was aware had received all their funds back.

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As both parties disagreed with the Investigator’s view, the complaint has been referred to me for a decision. What I’ve provisionally 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. Our Investigator set out in detail why they consider V was a scam, rather than a failed investment. Neither party appear to be in disagreement with this point, so I won’t be repeating these points here, except to say that I agree with what the Investigator has already set out. I’ll therefore be considering whether Mr M is entitled to any reimbursement. Starling was a signatory of the CRM Code when this payment was made, which required firms to reimburse customers who had been the victims of APP scams like this, in all but a limited number of circumstances and it is for Starling to establish that a customer failed to meet one of the listed exceptions set out in the CRM Code. Under the CRM Code, a bank may choose not to reimburse a customer if it can establish that*: • The customer ignored what the CRM Code refers to as an “Effective Warning” by failing to take appropriate action in response to such an effective warning • 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 services; and/or the person or business with whom they transacted was legitimate *Further exceptions outlined in the CRM Code do not apply to this case. Did Starling meet its obligations under the CRM Code and did Mr M ignore an effective warning? When making the payment to Starling, Mr V was asked, via in-app multiple choice questioning, what the payment was for, and he advised he was paying a family member or friend by sending them a gift. He confirmed he’d met this person and received the bank details face to face, and that the payment wasn’t being made as the result of being asked unexpectedly, or due to an emergency. As a result, Mr M wasn’t provided with a warning specific to investment scams. While I appreciate Mr M didn’t provide an accurate payment purpose (on the advice of the fraudster, which is something I’ll consider when determining Mr M’s own liability), the test of the CRM Code first and foremost for Starling’s part is whether it provided an effective warning to Mr M – which here it didn’t. I’ve also taken into account that this payment to the scam was significantly higher than any other Mr M had made in the past six months and was to a new payee, so in any event, I don’t think Starling went far enough in its interventions by relying on an on-screen warning without further questioning. I therefore don’t think Starling can rely on this exception under the CRM Code to not reimburse Mr M. Did Mr M have a reasonable basis for belief?

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I’ve thought carefully about all the available evidence in deciding whether Mr M acted reasonably when making this payment. I accept there were some red flags regarding V, such as the unrealistic returns quoted in its brochure documentation, and its request for investors to provide incorrect payment purposes to their banks. However, I’ve also had to balance this against the fact that by the time Mr M made a payment to V from his Starling account, he had already seen a network of friends around him receiving apparent returns on their own investments, and that these were individuals that Mr M considered financially savvy and knowledgeable in business – so I can understand why in these circumstances, without a greater awareness of how investment scams and Ponzi schemes work, this would have appeared to be a legitimate opportunity. Mr M has explained that he wasn’t told by V about a specific rate of return, but saw it as a more profitable avenue than a savings account. Mr M has explained that during the Covid pandemic he realised the importance of having a ‘back-up’ revenue to rely on and thought he was protecting himself by investing. I’m aware that Mr M was told to select ‘friends and family’ as a payment purpose and have considered whether this should’ve been a red flag for Mr M. Mr M has explained that he was paying the trader’s personal account, which for him seemed to be highly reassuring as he was dealing with a traceable individual. Mr M has explained he was simply told to select a specific payment purpose ‘as that was what everyone else had done’ and knowing this to be true, he didn’t see it as a concern. While I can see in hindsight that this should’ve raised concerns with Mr M, considering the wider circumstances here, I don’t think it was unreasonable that Mr M overlooked this. Having considered Mr M’s circumstances, I don’t think he acted unreasonably in his circumstances – I don’t think Mr M was aware of the possible profits being unrealistic, and most importantly, went into this investment with recommendations from those he trusted who already appeared to be benefitting from investing. Overall, for the reasons I’ve explained above, I don’t think there are any exceptions under the CRM Code that Starling can rely on to not provide Mr M with a full refund for his losses. I’ve also thought about the £100 compensation Mr M was offered by Starling. I can imagine that the delays in receiving a response from Starling must have caused Mr M concern at an already stressful time, although I appreciate these delays were largely in part to a wider consideration of V and ongoing investigations. I therefore think the offer made by Starling already is fair to reflect the impact this delay may have had on Mr M. My provisional decision My provisional decision is that I uphold Mr M’s complaint in full and that Starling Bank Limited should now: • Reimburse Mr M the £20,000 payment he made towards the scam • Apply 8% simple interest, from the date of the Investigator’s view until the date of settlement Mr M accepted my provisional decision, but Starling didn’t. To summarise, it said that: • It stands by its challenge that this was a high-risk investment scheme, that returns aren’t guaranteed and that investors make payments at their own risk; • Mr M stated this payment was a gift to a friend or family and that he’d received the

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bank details face to face. Starling doesn’t consider that, had it contacted Mr M, he would have given the genuine reason for making the payment and therefore it shouldn’t be held fully liable as this prevented further meaningful intervention; • No warning or intervention could have uncovered this scam and therefore Starling questions what more it could have done. • Starling’s warning specifically advised that ‘you must not make the payment if you are being told how to answer the questions or explain the payment. Read the questions carefully and answer truthfully, otherwise you could lose all the money’. As Mr M didn’t follow this advice, he should also be held partly liable. As Starling disagreed, I’ll now issue my 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. First, to cover off Starling’s concerns that this was a failed investment, rather than a scam, while I accept there were some elements of V that give the impression that it was operating legitimately (such as a number of investors receiving returns, some of which were significant and some funds being used for trading or converted into cryptocurrency), I’m persuaded that evidence that counters V’s legitimacy is sufficiently persuasive to conclude that V was operating a scam. This includes: • V making falsified claims that it was (or was in the process of becoming) regulated, both by the FCA and by regulatory bodies in another country, which both regulators have confirmed to be untrue. • While the understanding of V was that funds deposited would be immediately be moved to a trading platform, of the funds sent to V’s main ‘traders’, less than half appears to have been used for this intended purpose. Funds also weren’t segregated from the account owner’s personal funds. • V’s claims that investors could receive returns of up to 600% are unsubstantiated. • While V claimed to have a trading account with a FCA regulated platform, there were no payments made to this platform by V. • One of V’s account providers has confirmed that V informed it also of its partnership with the above mentioned trading platform, as well as it’s regulation abroad when applying for accounts, both of which, as explained, were untrue. Therefore, considering all evidence holistically, I am satisfied that it is more likely than not that V was acting illegitimately, since its intentions did not align with Mr M’s intentions for funds sent to be immediately traded, and I am satisfied that V was dishonest in this regard. It follows that I’m satisfied Mr M was the victim of a scam. Therefore, moving onto Starling’s comments on why Mr M should be held liable in part, I’ve carefully considered its points but having done so, I maintain that, in the circumstances, Starling should be held liable for Mr M’s losses. I accept that Mr M was warned about providing accurate reasons for his payment purpose and that he didn’t do so, which impacted Starling’s ability to protect him. However, as I set

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out in my provisional decision, I think Starling ought to have gone further in its interventions than providing an on-screen warning based on the payment value and made further attempts to understand the payment Mr M was making. Whether a firm provides an effective warning is an objective test and one here that Starling didn’t meet, therefore making it liable, at least in part under the CRM Code. Also as highlighted, it is not a requirement of the CRM Code for a firm to be able to prevent a scam. In circumstances where neither a firm or a customer could have prevented the scam, that customer is still entitled to full reimbursement. As part of my considerations into whether Mr M acted reasonably, or whether he should also hold some liability for his losses, I have considered his actions in bypassing guidance by Starling to provide an accurate payment purpose, and also his trust in V to mislead the bank. As set out, I agree that these were red flags, but I think other elements of this scam and the social engineering in place from so many in a social circle being victims also, make it understandable why such flags were overlooked. Essentially, Mr M had seen the apparent success of the scam first hand and so I think it would’ve been difficult to overcome this confidence in what he was doing without quite stark evidence that something underhand was at play. Therefore while I can appreciate Starling’s points raised, my opinion remains the same that Mr M is entitled to a full refund under the CRM Code, as no exceptions to reimbursement apply to his circumstances. My final decision My final decision is that I uphold Mr M’s complaint. I direct Starling Bank Limited to pay Mr M: • £20,000 that he paid towards the scam • Apply 8% simple interest, from the date of the Investigator’s view until the date of settlement Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 27 April 2026. Kirsty Upton Ombudsman

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