issue 135 August 2016 1 ombudsman news essential reading for people interested in financial complaints – and how to prevent or settle them

in this issue complaints involving fighting scams page 3 Money matters are Our case studies in this But in the face of ever-more complicated enough to issue echo many of the sophisticated crime, what ombudsman focus: navigate, without the risk problems I heard about at a else can be done? Like spotlight on scams of falling victim to financial recent drop-in we held with so many other financial page 17 crime. Unfortunately, scams MPs and their caseworkers. problems, awareness plays are a fact of daily life – and a huge role in prevention. Q&A page 26 Regardless of the type when daily life changes, So to me, it’s essential that of scam – or the amount scams evolve with it. everyone with an insight, of money that’s been shares that insight. That In particular, new lost – the ordeal of goes as much for individual technologies – which being scammed may be people talking to their should make life easier – distressing, and even neighbours as it does for inevitably come with new life-changing. From our organisations like ours – risks. So while some people conversations with financial who, in dealing with large continue to receive fake businesses, we know that volumes of complaints investment opportunities protecting customers is and concerns, can see the through their letterbox, high on their agenda. And bigger picture and identify others are falling victim to it makes sense that part worrying patterns and “number spoofing” on their of the solution will be trends. mobiles – or finding their ensuring that technology online business banking and other safeguards keep threatened by malware. one step ahead of the scammers.

follow us meet us we’re in: @financialombuds Financial Ombudsman Service w Glasgow scan for financial-ombudsman.org.uk w Sheffield previous issues for dates see page 25 subscribe [email protected]

financial-ombudsman.org.uk 2 issue 135 August 2016

Caroline Wayman

At the ombudsman, we’ll By keeping up the continue to share what conversation about scams, we’re seeing whenever we and working together, can – as we did with our we can all play a part in report on last stopping them. year. And I’m grateful to the experts who’ve shared their perspectives with us in this month’s ombudsman focus.

Caroline

... it’s essential that everyone with an insight shares that insight

Financial Ombudsman Service consumer helpline technical advice desk Exchange Tower Monday to Friday 8am to 8pm and 020 7964 1400 London E14 9SR Saturday 9am to 1pm Monday to Friday 9am to 5pm 0800 023 4 567 switchboard 020 7964 1000

© Financial Ombudsman Service Limited. You can freely reproduce the text, if you quote the source. ombudsman news is not a definitive statement of the law, our approach or our procedure. It gives general information on the position at the date of publication. The illustrative case studies are based broadly on real life cases, but are not precedents. We decide individual cases on their own facts.

financial-ombudsman.org.uk issue 135 August 2016 scams case studies 3 complaints involving scams

With losses Some scams – including case study In response, the payment from financial in areas where we’ve provider said since she previously shared our 135/1 hadn’t posted the phone, fraud increasing insight – have become less she wasn’t covered by their significantly over common in recent months, consumer complains protection policy – so they recent years – both thanks to new technology that payment provider couldn’t refund the money and increased awareness. she’d lost. for businesses and But scams and fraud didn’t offer enough Unhappy with the payment their customers continue to develop – and protection after scam provider’s decision, Ms B the following case studies leaves her without – it’s perhaps not complained. She said she’d highlight the range of surprising that we goods or payment been left without a phone problems we see. continue to see Ms B was selling her mobile or any payment – and their In some cases of fraudulent phone online, and used an protection policy should complaints involving investments, scammers electronic payment provider have covered her for these a range of scams. pose as legitimate to receive the buyer’s kinds of situation. And And as with many of regulated businesses payment. After the buyer when the payment provider the problems people to trick people into had sent her £200, they wouldn’t change their transferring them money. asked to collect the phone decision, Ms B called us. bring to us, scams In these cases, we may in person. be unable to help, since complaint not upheld can have a huge A week later, after the buyer the person isn’t dealing personal impact on had collected the phone, We asked the payment with a regulated financial Ms B received an email provider for more people’s lives – with business. The Financial from the payment provider. information about Ms B’s some people losing Conduct Authority (FCA) They said the payment complaint. They explained has information on these their life savings. she’d received for the that Ms B had been the “clone” firms – and how phone had been fraudulent victim of a scam, as to avoid them – on their – and they asked for proof someone had fraudulently website, along with wider of postage to check the used the buyer’s account information on how to phone had been sent to to purchase the phone. avoid scams. the buyer. Ms B told the payment provider the buyer had collected the phone in person, so she didn’t have proof of postage.

financial-ombudsman.org.uk 4 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 4

... the payment provider explained that Ms B had complained about a similar scam a few years earlier

When the real account Ms B accepted that she’d holder had queried the been told she wouldn’t be payment, the payment protected if she delivered provider had carried out a an item in person. But full investigation – and they she said she thought the sent us evidence showing payment provider’s terms that the account holder were unfair – and since hadn’t authorised the she’d lost out, she wanted payment. them to cover the cost. The payment provider also We explained to Ms B that sent us a copy of their user it’s not for the ombudsman agreement. The agreement to tell the payment provider showed that a seller would what procedures or only be protected if they practices it should follow. could provide proof they’d From the user agreement, sent the item to the buyer’s it was clear this kind of listed address – which Ms B scam wasn’t covered – and hadn’t done. we thought the payment provider had applied their When we asked if Ms B terms fairly. While we were had been made aware of sorry to hear that Ms B had this, the payment provider lost out to a scam, we said explained that Ms B the payment provider had had complained about a acted fairly. similar scam a few years earlier. On that occasion, they’d refunded Ms B as a gesture of goodwill – but they’d highlighted the relevant parts of their user agreement at the same time. So they said Ms B would have been aware she wouldn’t be protected if she couldn’t provide proof of postage.

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 5 xxxxxxxxxxxxxxxxxx case studies 5

case study She said she didn’t know Looking at the website who he’d sent his money Mr K had been directed 135/2 to, but since it wasn’t her to by the scammer, we company, she wouldn’t be agreed it looked very consumer complains refunding his money. professional – and even included the regulator’s that business should Frustrated, Mr K asked us Firm Registration Number to step in. help after losing €500 for Company A. So we to scam firm complaint out of appreciated that he jurisdiction genuinely believed he’d Mr K received a phone been dealing with a We spoke to Company A call from a man claiming regulated investment about the money Mr K said to be from an investment company. company, Company A. He he’d transferred. The owner But we explained that told Mr K his company dealt told us she was the only we could only look into in derivatives, and said person in the business who complaints from customers Mr K could make significant would deal with customers of regulated financial returns if he was willing to directly over the phone, businesses – and since invest straightaway. and she’d never spoken to Mr K. She explained Mr K wasn’t a customer After some discussion that her company didn’t of the real Company A, about the details – and have an active website – we couldn’t deal with the having looked at the and the account Mr K had complaint against that firm. company’s website – Mr K transferred money to didn’t We were sorry to hear agreed to transfer €500 to belong to her business. that Mr K had lost money, the investment company. and we encouraged him But when it became clear It was clear that a scammer to report the scam to the some time later that had posed as Company A to regulator and the police. his money hadn’t been trick Mr K into transferring And Company A’s owner invested as it should, money. We explained to contacted us to let us know Mr K found an address for Company A that a scammer that since she’d reported Company A and wrote to had used their details to the scam, the regulator had complain. create a “clone” firm – and we encouraged the owner issued a warning – and The owner of Company A to report the matter to the two potential investors wrote back to Mr K saying regulator and the police. had avoided losing money she’d never received any after being contacted by money from him. scammers.

... she’d reported the scam, the regulator had issued a warning – and two potential investors had avoided losing money after being contacted by scammers

financial-ombudsman.org.uk financial-ombudsman.org.uk 6 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 6

case study Mrs N went to her post Mrs N complained to the office and arranged a . She said if the bank 135/3 money transfer with her had checked her bank debit card. But as she was accounts – and clearly told consumer complains walking home, she began her she’d been scammed that bank won’t refund to have concerns about – she wouldn’t have given what she’d been told. the scammers the transfer money transferred to Worried she could have reference number. computer scammers been scammed, Mrs N The bank offered Mrs N called her bank as soon as £50 to recognise that their Mrs N received a phone she reached her house. customer service could call from someone who The bank’s adviser have been better. But said they were from her established that Mrs N unhappy with this – and broadband company. Mrs N hadn’t given the caller the distressed at the prospect said her computer had been reference number needed of losing so much money – running slowly, and agreed to receive the money she’d she phoned us. to let the caller access her transferred. And they told PC remotely to make it run Mrs N that, if she had complaint resolved faster. Half an hour later, concerns, she would need while Mrs N was still on the We asked the bank for to go back to the post call, the caller offered her recordings of Mrs N’s calls office. £200 compensation, and to them – so we could asked for her bank details Later that day, Mrs N called establish whether they’d to make the payment. the bank again. She said done enough to stop Mrs N the caller had just phoned losing her money. After a few more minutes, back and convinced her to they said they’d fixed her It seemed that when Mrs N give them the reference PC. But they said they’d had first called the bank, number they needed. accidentally paid £3,200 she’d gone into a lot of And having checked her into her bank account – and detail about what had accounts online, she’d as it would take a day to happened. She’d explained realised that the £3,200 reboot her PC, they asked that the caller had told they’d told her had her to visit the post office in her to log on to her online accidentally been paid into the meantime to send them banking while they were her account had actually the money they’d overpaid. accessing her PC – and that been moved from her she’d seen the £3,200 in savings account – so she’d her account. sent the scammers £3,000 from her own savings. The bank’s adviser made enquiries with their fraud team – and eventually told Mrs N that they couldn’t reverse the transaction.

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 7 xxxxxxxxxxxxxxxxxx case studies 7

In our view, the adviser He then made several And he hadn’t looked into hadn’t sounded internal phone calls to her account activity. We sympathetic at all. At one see if there was anything agreed with Mrs N that, if point, he told Mrs N that no the bank could do to get he’d told her the money in one could have accessed the money back – clearly her bank had in fact come her computer. And when explaining to his colleagues from her savings account, she’d raised concerns what had happened to it would have confirmed to about transferring her Mrs N. But by this time, it her that something money through the post was too late for the bank was wrong. office, he’d assured her to stop her money being In the circumstances, the that the transfer “would moved. bank offered to cover the have been legitimate”. The bank told us that, while £3,000 Mrs N had lost – We also listened to the they had sympathy with and to pay her £200 to adviser’s conversation Mrs N, she shouldn’t have reflect the poor service with the bank’s internal given the scammer the she’d received from them. fraud team. Despite Mrs N transfer reference number having clearly described if she’d had concerns. They what she’d done, the also said they gave scam adviser appeared not to warnings when customers have listened – telling the logged in to online banking. fraud team she’d “bought We appreciated that, at something she didn’t least later on, the bank had want”. tried to help Mrs N. But we When Mrs N phoned the thought that the bank could bank after giving the have done more during the scammer the reference first phone call – and that if number, the person she they had, it was likely that spoke to was far more Mrs N wouldn’t have lost helpful. He said that he’d her money. heard about these types of In particular, we pointed scams – and acknowledged out that the first adviser’s that someone could have lack of clarity and empathy accessed Mrs N’s PC. – when she’d made it clear what her state of mind was – had left Mrs N with doubts about whether or not she’d actually been scammed.

... as she was walking home, she began to have concerns about what she’d been told

financial-ombudsman.org.uk financial-ombudsman.org.uk 8 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 8

case study Left without his watch or In the circumstances, we We appreciated that payment, Mr Y contacted agreed that Mr Y’s watch the insurer’s letter to 135/4 his home insurer. He said had been stolen. But the Mr Y hadn’t specifically the scammer had stolen insurer said that even if mentioned theft by consumer complains his watch, and he wanted the watch was stolen, their deception. And we thought after insurer won’t pay to make a claim. But the policy didn’t cover theft they could have explained insurer said Mr Y had by deception – and since their position more clearly out for watch sent to willingly posted the watch – the scammer had clearly in that letter. But they had scammer and as soon as he’d posted deceived Mr Y to get the been clear when they spoke it, he no longer owned the watch, the claim wasn’t to Mr Y on the phone. So Mr Y sold his watch through watch. So it couldn’t have covered. while we were sorry to hear an online auction site. been stolen from him. that Mr Y’s watch had been Mr Y said this was the first After he received payment, stolen, we didn’t tell the Mr Y complained. But when he’d heard of this exclusion the buyer contacted him, insurer to pay the claim. the insurer maintained they – and he didn’t think it was asking for the watch to be wouldn’t pay the claim, fair that the insurer hadn’t sent to a different address Mr Y brought his complaint mentioned it in their final to the one he’d listed on his to us. response letter about his online profile. claim. But listening to the After Mr Y had posted the complaint not upheld calls Mr Y had made to his watch, he received an email We asked Mr Y for more insurer, they had clearly from the auction site. The information about what discussed the “theft by email said the payment had happened. He said deception” exclusion – he’d received for his watch he’d never sold anything and why Mr Y wouldn’t hadn’t been authorised – online before, so he hadn’t be covered under those so the money he’d received been suspicious about the circumstances. would be refunded to the change of address. And account the payment had when he realised he’d sent come from. And since he the watch to a fraudster, hadn’t sent the watch to he’d done all he could to the address listed online, stop the post – but he’d he wasn’t covered by been unsuccessful. the auction site’s own protection scheme – and Mr Y also told us he was he couldn’t get a refund for aware of a similar court the watch. case which suggested his watch had been stolen – so he felt he should be able to claim under the policy.

... the insurer said Mr Y had willingly posted the watch – and as soon as he’d posted it, he no longer owned the watch. So it couldn’t have been stolen from him

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 9 xxxxxxxxxxxxxxxxxx case studies 9 ... one of the online warnings the bank told us about said that a slow-running website could indicate possible fraud case study page. In putting in the Looking at what had We pointed out to the details, she’d inadvertently happened, it seemed that bank that – as malware 135/5 given the fraudsters what although Miss O had typed was a problem that the they needed to take the in the business’s passcode, bank was actively warning small business money. the fraudsters had gone on its customers about – we to make the transactions thought their adviser could complains that Mr G’s bank raised an themselves. So Miss O have alerted Miss O that indemnity claim with the bank won’t hadn’t actually authorised something might be wrong. that the money had refund fraudulent the transactions. The bank been transferred to – but Given everything we’d transactions – after also acknowledged that only managed to recover seen, we decided the bank the hoax website would employee uses hoax around £2,000 of more could have done more to have looked exactly like website following than £40,000 that had prevent Mr G’s business their own – so Miss O malware attack been lost. from losing their money – couldn’t have known she and told them to cover the When Mr G asked his was using a fake site. In the One afternoon one of amount they hadn’t been bank to cover the rest of circumstances, we didn’t Mr G’s employees, Miss O, able to get back. the money, they refused. agree that she’d been told him that she thought They said his business grossly negligent. there’d been fraud on his had broken the terms and business’s bank account. The bank told us that they conditions of the account gave security warnings Miss O said she’d been – acting with “gross on their business banking using the online business negligence” by giving the website explaining the risk banking service and had passcode to a third party. of fraud. They argued that been prompted to enter Frustrated, Mr G Mr G and his employees the log-in details. A short complained. When the bank should have read these. time later, she’d noticed wouldn’t reconsider, he that around £40,000 had But according to Mr G – contacted us. been paid from the account and the bank’s records to payees she didn’t complaint upheld – Miss O had phoned recognise. the bank shortly before We asked the bank for the she reported the missing Mr G phoned his bank terms and conditions they money, to say the website immediately to explain were referring to. These was running slowly. The what had happened. They didn’t say that a business bank’s adviser had told her said it was likely that the would be responsible for there was nothing wrong computer Miss O had been any losses arising from and that she could carry using was infected with a the log-in details being on using the site. Yet one virus – and that the screen disclosed to a third party. of the online warnings the she’d seen was a hoax However, we considered bank told us about said whether Miss O had that a slow-running website authorised the transactions could indicate possible – which might have meant fraud. the business was liable for them.

financial-ombudsman.org.uk financial-ombudsman.org.uk 10 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 10 ... the investment provider had told the adviser they couldn’t trace the solicitor’s firm, so they wouldn’t transfer the money to the account case study After reporting the fraud to The adviser had emailed We acknowledged that Ms the police, Ms Q managed to “Ms Q” to let her know – Q had emailed the adviser 135/6 recover around £170,000. and “Ms Q” had replied before – and that she had But she felt the adviser with details of an account worked in Asia. But as a consumer complains should have checked before in her name, with a UK finance professional, the that adviser won’t arranging the withdrawal – high street bank. In adviser would have been and asked them to make processing this second aware of the risk of fraud pay back money up the money she hadn’t request for the funds to be and scams. And in our transferred to got back. withdrawn, the investment view – having received an fraudsters from provider highlighted that email asking for such a The adviser said they the account details were large sum of money to be investment bond – couldn’t have known the different to what they transferred overseas – the after her email was emails weren’t really from had on their records for adviser could have realised hacked Ms Q. But to settle her Ms Q. But the adviser something wasn’t right. complaint, they offered to confirmed the details were Ms Q received a letter pay 25% of the money If that wasn’t enough, correct – and finalised the from the provider of she’d lost. we thought alarm bells transaction. her investment bond, should certainly have Ms Q didn’t think this was confirming £250,000 had Ms Q told us that she’d started ringing when the enough – and contacted us. been withdrawn. But she used the same financial investment provider said hadn’t made a withdrawal. complaint upheld adviser for more than ten they couldn’t trace the firm Shocked, she phoned her years and always had a of solicitors. We found it We asked the adviser financial adviser – who face-to-face meeting when hard to see why, at that to send us the emails said he’d processed the she wanted to discuss point, the adviser hadn’t they’d exchanged with transaction after arranging her investments. So phoned Ms Q. the fraudsters who were it with her by email. she thought the adviser pretending to be Ms Q – All in all, we decided the shouldn’t have acted Ms Q and the adviser as well as the adviser’s adviser could have stopped without phoning her first. established that her email records of their contact with the fraud happening. The account must have been the investment provider. For their part, the adviser investment provider had hacked. So the emails the said that, around that time, already adjusted Ms Q’s We saw that the fraudsters adviser had received had Ms Q had been emailing bond when she’d recovered had initially provided been coming from Ms Q’s them about arranging a some of the money. So details for a solicitor’s bank address, but she hadn’t sent mortgage. So getting an we told the adviser to pay account in Hong Kong. them herself. And the bank email from her wasn’t the provider the amount The investment provider account the fraudsters had unusual – or cause for needed to put Ms Q’s bond had told the adviser they given to transfer the money concern. They also pointed in the position it would be couldn’t trace the solicitor’s to – although in Ms Q’s out that Ms Q had worked in if the unrecovered money firm, so they wouldn’t name – wasn’t actually her in Asia in the past, so it hadn’t been stolen. transfer the money to account. seemed reasonable that the account. she’d want to use a Hong Kong bank account. Given everything we’d seen, we agreed with Ms Q that the adviser should have taken more care of her money.

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 11 xxxxxxxxxxxxxxxxxx case studies 11

case study complaint not upheld to someone who bought, or agreed to buy, the car. We asked Mr C for more He agreed that the man 135/7 details about the theft. had tricked him. But in his He explained that he’d view, the man had never consumer complains invited the man to a nearby agreed to buy the car – so after insurer rejects car park so he could see he couldn’t have been a how well the car drove. claim for car stolen “buyer”. during test drive The man said the car drove really well. As Mr C got out We didn’t agree. It was of the car to swap sides clear from the man’s Mr C was selling his car – leaving the keys in the actions that he’d set out online. When a man ignition and the engine to trick Mr C – and he’d responded to his advert, running – the man stayed done so by pretending to Mr C arranged to show him in the driver’s seat. While be interested in buying the the car. But while Mr C was Mr C was walking around car. And even though he showing the man the car, the car, the man shut the hadn’t actually made an the man stole it. driver’s door and drove offer for the car, the man Mr C called his insurer away. was clearly posing as a to make a claim. But the potential buyer – so the Looking at Mr C’s policy insurer told him they policy was clear that Mr C documents, the policy wouldn’t pay out, as his wouldn’t be covered. said theft “resulting from policy didn’t cover theft deception by a person While we were sorry to hear where someone was posing pretending to be a buyer” that Mr C had lost his car, as a buyer in order to steal wouldn’t be covered. And we thought the insurer had the car. we could see this was listed applied the exclusion fairly Mr C complained. He said clearly as an exclusion in – and we didn’t tell them to he didn’t remember ever the policy summary – so pay the claim. having been told about we thought the insurer had the exclusion, so he didn’t highlighted the exclusion think it was fair for the to Mr C. insurer to rely on it to turn Mr C accepted that he’d down his claim. And in any been told about the case, he didn’t agree the exclusion, but he didn’t man was a “buyer”, since think it was relevant in his he hadn’t ever agreed to circumstances. He said that buy the car. as the policy didn’t define When the insurer a “buyer”, it must refer maintained their decision, Mr C referred the complaint to us.

... he’d set out to trick Mr C – and he’d done so by pretending to be interested in buying the car

financial-ombudsman.org.uk financial-ombudsman.org.uk 12 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 12

case study But the insurer explained Mrs E’s insurer had initially to Mrs E that the other rejected the claim – but had 135/8 party was in the process of later settled it. However, gathering evidence about the insurer hadn’t told her consumer complains the accident. And they said about this. if the evidence was strong, that insurer won’t We also had concerns the claim might eventually about how the insurer had pay claim following be settled as a “fault claim” looked into Mrs E’s case. alleged “crash for against Mrs E. In particular, there was no cash” scam 18 months later, Mrs E was evidence they’d asked still waiting for an answer Mrs E’s passenger about Mrs E was driving to work – and complained again. how the accident happened. with a friend when she The insurer apologised, In our view, given Mrs E drove into the back of saying they’d already seemed to feel strongly another car. She claimed on settled the claim. And that she’d been a victim of her car insurance, saying unhappy with their offer of a scam, the insurer could the driver had deliberately £50 compensation, Mrs E have investigated more braked and that she’d been contacted us. thoroughly. the victim of a “crash for In light of what we’d seen, cash” scam. complaint upheld we decided that – even The insurer sent an engineer The terms and conditions though it was the insurer’s to inspect Mrs E’s car – who of Mrs E’s insurance policy call whether to defend the concluded that she had clearly said the insurer other party’s claim – £50 caused the accident. When could decide whether or not didn’t make up for their Mrs E complained, the to accept liability for any poor customer service. insurer said that if the other accidents. We explained to We told them to pay Mrs E driver withdrew their claim Mrs E that this was normal another £250 for the upset against Mrs E, they’d make in car insurance. But we and inconvenience she’d sure her no-claims discount would check the insurer had experienced because of reflected the fact the acted fairly in her individual their poor communication accident wasn’t her fault. circumstances. and handling of the claim. When we asked for the insurer’s records, we found that the other party had claimed for personal injury resulting from the accident.

... given Mrs E seemed to feel strongly that she’d been a victim of a scam, the insurer could have investigated more thoroughly

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 13 xxxxxxxxxxxxxxxxxx case studies 13 ... the fraudsters had used a technique known as “number spoofing” to make it appear that they were calling from his bank case study The adviser said the bank But the bank explained But looking at the bank’s would do all they could to that Mr M’s money had response to the scam, it 135/9 get the money back. But been sent from his online was clear they could have when they told him two bank account – and they provided better service to consumer complains weeks later they’d only confirmed the fraudster Mr M. He’d called them that bank should managed to recover £10, would have needed Mr M’s several times, and each time Mr M complained. username and password to an adviser had promised to refund fraudulent gain access to the account. call him back – but no-one Mr M said the bank’s transfer had done so. Mr M was customer service had been When we spoke to already very upset and terrible, and he wanted Mr M about this, he said When Mr M’s phone rang, stressed – and the bank’s a refund of all the money the phone call from the his phone showed the call lack of response had only he’d lost. But the bank said fraudsters had lasted some was from his bank. The added to that stress. he’d authorised the transfer time – and on reflection, he person on the phone told himself – so they weren’t couldn’t remember exactly The bank agreed with him some money had been responsible. Frustrated, what details he’d given out. us that their service had taken from his account. Mr M called us. Given that the fraudsters fallen short of their usual After a lengthy discussion would have needed Mr M’s standards. They offered about his account details – complaint upheld in part security details to access Mr M £200, which he answering various security We asked Mr M for more his account, it seemed they accepted. questions along the way – information about the must have persuaded him Mr M was told his account phone call he’d thought to provide this information had been temporarily was from his bank. Mr M over the phone. blocked, and he wouldn’t told us he’d been called We thought that by be able to use his online on his mobile – and the voluntarily giving the banking. He arranged to number on the screen was fraudsters his security meet a manager at his his bank’s phone number. details, Mr M had effectively local branch the next day, He’d only later discovered authorised the transfer in order to reactivate his that the fraudsters had himself – so we didn’t tell account. used a technique known as the bank to refund the But when Mr M arrived at his “number spoofing” to make money. local branch the next day, it appear that they were he found the branch was calling from his bank. closed for a bank holiday. Mr M explained that he’d When he called his bank, given the person on the they said it seemed he’d phone some details, been the victim of a scam. including a security code They confirmed almost all from his card reader. He the money in his account said that, other than the had been taken – totalling code, the only personal around £15,000. details he’d provided were his date of birth and mother’s maiden name.

financial-ombudsman.org.uk financial-ombudsman.org.uk 14 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 14

... he’d taken a risk in entering his PIN without being able to see how much money he was agreeing to pay case study But when the bank said And since Mr V had entered he must have authorised his PIN voluntarily, the bank 135/10 the transaction – and maintained he’d authorised maintained they wouldn’t the transaction – and they consumer complains refund the money – Mr V said there was nothing more after bank refuses brought his complaint to us. they could do to get the money back. to refund fraudulent complaint not upheld transaction while Mr V accepted that he’d We asked Mr V for put his security details on holiday more details about the into the payment terminal. transaction. Mr V said he’d But he said he hadn’t Mr V was shopping on put his card into a payment been authorising such a holiday abroad. When the terminal with a blank large payment – so he still shopkeeper offered him a screen. He said he’d been thought his bank should that would suspicious at first – but refund the money. give him unlimited calls and when he queried the blank Looking at what had internet access for £10 per screen, the shopkeeper happened, it was clear month, Mr V agreed to explained that it was a Mr V had been tricked into buy it. special function for direct making the transaction. But debits. The shopkeeper The shopkeeper told Mr V he’d taken a risk in entering had reassured Mr V that he’d set up a direct debit his PIN without being able no money would be taken for the monthly fee, with no to see how much money he at that time – so Mr V had upfront cost for the phone. was agreeing to pay. But when he returned to entered his PIN into the the UK, Mr V discovered terminal. In the circumstances, we took the view that Mr V had that £8,000 had been When we spoke to authorised the payment. debited from his account Mr V’s bank, they told us And while we were sorry to – so he contacted his bank they’d attempted to get hear that he’d lost a lot of immediately asking for the his money back through a money, we didn’t tell the money to be refunded. “chargeback” – asking the bank to refund him. When the bank said they shopkeeper’s bank to return couldn’t get the money the money – as soon as he’d back, Mr V complained. contacted them. But the He insisted he hadn’t given other bank had successfully permission for so much defended the chargeback. money to be taken from his account.

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 scams case studies 15 xxxxxxxxxxxxxxxxxx case studies 15

Mr L argued that he’d On the other hand, the 135/11 been put in touch with the dealer had told Mr L he dealer through a legitimate would take it to an auction. consumer complains auction house. He didn’t In our view, Mr L had been that insurer won’t pay agree he’d been deceived deceived. into giving the brooch to for antique brooch Mr L felt the insurer the dealer – saying it was should have told him stolen by dealer only later on that it became they didn’t cover this type clear the brooch had been of claim. However, we Mr L arranged for an stolen. antiques dealer to visit explained that this type of his home to value a gold But the insurer wouldn’t exclusion is usual in home brooch. He gave the dealer change their decision – and insurance policies. And the brooch to sell at auction Mr L contacted us. there was nothing about – but when he later tried to Mr L’s circumstances that complaint not upheld contact the dealer to find suggested he wouldn’t have out what had happened, We looked at the terms bought the policy if he’d they wouldn’t answer their and conditions of Mr L’s known about the exclusion. phone and their website insurance policy. This said We were sorry to hear what had gone. that the insurer wouldn’t had happened to Mr L – but cover “loss by deception, Mr L claimed for the brooch we decided the insurer unless the only deception on his home insurance. hadn’t acted unfairly in used is to get into your But the insurer turned turning down his claim. home”. down the claim – saying they wouldn’t pay for items Mr L had asked the dealer that had been lost “by to visit his home, so he deception”. hadn’t been deceived in that way – but we still needed to decide whether he’d lost the brooch by deception. Mr L told us that the dealer had since been arrested – after deliberately closing his business and “absconding” with more than 500 other items. In this light, it didn’t seem the dealer had ever intended to sell the brooch.

... the dealer had since been arrested – after deliberately closing his business and “absconding” with more than 500 other items

financial-ombudsman.org.uk financial-ombudsman.org.uk 16 issue 135 August 2016 scams case studies xxxxxxxxxxxxxxxxxx case studies 16

case study The provider In our view, the documents We also found that Company looked into the claim. But were very unclear – and D’s website had been taken 135/12 they told Mrs A she didn’t contradictory in places. down – and that Company have a valid claim under D had been struck off the However, at various points, section 75 of the Consumer Companies Register. consumer complains Company D and Company Credit Act – because there that credit card E were referred to as jointly In light of everything we’d was no “debtor, creditor, and severally liable for the seen, we decided it was provider won’t pay supplier” chain. They said completion of the contract. likely that Mrs A’s money section 75 claim for that, although she’d made hadn’t been invested – scam “investments” the payment to Company D, We told the credit card which meant that Company the company that ran the provider that, from D had breached their Following a cold call from a forestry scheme – Company what we’d seen, we’d contract with her. So we marketing company, Mrs A E – was the one she actually concluded Company D was told the credit card provider agreed to pay £10,000 to had the contact with. And a “supplier”. So there was to refund the £10,000 Company D – believing her Companies D and E didn’t a valid “debtor, creditor, she’d paid. money would be invested in have any connection with supplier” chain – and it was forestry schemes. each other. irrelevant whether Company D and Company E were A few months later – The credit card provider related. after receiving a cheque also pointed out that for around £200 – she Mrs A hadn’t ever been Mrs A sent us information complained that she hadn’t guaranteed a return on her she’d received from the got the level of return she’d investment. So they didn’t police, who she’d also been been promised. Although think there had been any in touch with. The police Company D repeatedly told breach of contract. said that they believed the her she’d receive more “investment” was a boiler Unhappy, Mrs A complained money, it didn’t arrive. room scam – and that – and the dispute was Unhappy, Mrs A contacted around 500 other people eventually escalated to us. the provider of the credit were in a similar position. They didn’t think anyone’s card she’d used to put down complaint upheld an initial payment – and money had actually been asked if they could get her First, we needed to invested, but that small money back. establish who exactly Mrs A payments had been made had a contract with. So we to give the impression that looked carefully though the it had. paperwork Mrs A had been sent about the supposed investment.

... they didn’t think anyone’s money had actually been invested, but that small payments had been made to give the impression that it had

financial-ombudsman.org.uk financial-ombudsman.org.uk issue 135 August 2016 ombudsman focus: spotlight on scams 17 ombudsman focus: spotlight on scams

Last year £775 million was lost to financial fraud (Financial Fraud Rebecca Action UK). As criminals’ Langford methods grow ever more sophisticated, ombudsman focus brings together expert perspectives on scams and how to stop them.

“We need to work together to Rebecca Langford, policy lead for older make sure that everyone has people at Money the financial capability needed Advice Service to protect themselves” In October 2015 the Money We need to work together Advice Service carried out to make sure that everyone research which found that has the financial capability more than six in ten people – the ability, mindset and had received a suspicious connection to advice and phone call during a 12 financial services – needed month period. And the to protect themselves. there. Identifying which Financial Ombudsman initiatives are the most A core element of the Service’s review of impactful is an essential “thatUK Financial suggests Capability that so far, complaints about phone part of this. That way Strategy is to help people fraud found that eight in we can start to improve onlyaccess information a fraction and of people ten victims were aged financial capability. services when they over 55. who’veneed them. This used can be theUnfortunately freedoms there is Scammers are clever and facilitated by bringing currently very little UK- will often exploit the latesthave organisations encountered together from based problems” impact evaluation technology to impersonate across sectors so we have a of scam awareness genuine organisations, common understanding of programmes. meaning fraudsters the issues, what we want to are harder than ever to achieve and how we will get recognise.

financial-ombudsman.org.uk 18 issue 135 August 2016 ombudsman focus: spotlight on scams

This means we don’t We will shortly be have enough evidence publishing an evidence to determine what works review which will provide best to engage with people more detail on ‘what about scams to help them works’ to improve protect their finances. older people’s financial With this in mind, we capability, and improving have examined a number awareness of fraud is part of schemes from outside of this. We now need to the UK which have been work collaboratively with designed to prevent people organisations across the becoming victims of fraud. UK who are engaging with people about scams to Katy The Daily Money Worobec Management programme identify learnings which in the US and the can be used to inform MoneyMinded programme future projects. Katy Worobec, across Australia and the Further information about director of Financial South Pacific are good the Financial Capability Fraud Action UK examples of this. They Strategy can be found at Financial Fraud Action suggest that maintaining www.fincap.org.uk. UK’s membership includes social networks and banks, credit, debit and coordinating different card issuers, and card agencies can all help payment acquirers in safeguard people against 63% of people in the UK the UK. We provide a scams. received a suspicious call over forum for our members a 12 month period to work together on non-competitive issues relating to financial fraud. Our primary function is to facilitate collaborative 63% activity between industry participants and with other partners. Every day, banks work extremely hard to protect their customers from fraud. 7% As well as the security features customers are 7% of the UK population – 3.5 million aware of, such as the use people – had been victims of phone of three-digit card security fraud between 2010 and 2015 codes when shopping online or over the phone,

survey of 2,014 people by Opinium carried out 29 September – 2 October 2015

financial-ombudsman.org.uk issue 135 August 2016 ombudsman focus: spotlight on scams 19

there are also a range of PINs, passcodes and even Your bank or the police will other advanced detection their money. If you are never phone you to ask for and prevention processes a victim of fraud, where your PIN or password, ask working behind the scenes. you haven’t authorised you to update personal the transaction, you will details via a link in a text These highly sophisticated get your money back. But message or ask you to security systems stopped where customers are duped transfer money to a new £7 in every £10 of fraud into moving money to account for fraud reasons. from happening last year. fraudsters, banks will make Always consider what you But despite the industry’s decisions on refunds on a are being asked to do. And best efforts, financial case-by-case basis. if you think you have been fraud losses totalled a victim of fraud, contact £755 million in 2015, an Our message is that your bank immediately. increase of a quarter on consumers should be 2014. Fraud losses on UK very cautious about payment cards totalled giving out personal or £567.5 million and remote financial information, and banking fraud losses stood organisations holding data at £168.6 million last year. need to do all they can to protect people’s private We are determined to do details. everything in our power to stamp out fraud. The industry is continually evolving its response “Our message is that consumers to financial fraud and should be very cautious about this includes investing in new detection and giving out personal or financial verification tools, working information” with government and law enforcement through the Joint Fraud Taskforce, as well as educating customers of the dangers. As the industry uses increasingly secure systems to protect customers, criminals are turning to scams to trick their victims into handing £755 over their passwords, million

money lost to financial fraud in 2015

financial-ombudsman.org.uk 20 issue 135 August 2016 ombudsman focus: spotlight on scams

Kate Hobson and Nick scams reported to Citizens Advice’s consumer service MacAndrews, Citizens Advice consumer l telephone 44% experts give a snapshot 2% 2% l online 33% of scams reported 8% l mail 11% to Citizens Advice’s l doorstep 8% consumer service. 11% l other 2% l unclear 2% 44%

based on 5,030 reported scam cases between October 33% 2015 and December 2015

top five reported scam methods …

upfront payment fees (29%) %) – including requests to pay fees to release compensation payouts or loans, and traders disappearing after payments are made

fake services or invoices (26%) – including being charged to remove fake computer viruses and fake advertising invoices being sent to small businesses

goods not being received (9%) – generally involving purchases made through social media or auction websites, where the scammers are private sellers or based abroad

vishing (7%) – including cold calls asking for credit or debit card details to renew a subscription, or for information about personal debts

subscription traps (7%) – where people are misled into signing up to subscription services, usually with a free or discounted trial – and scammers then take multiple large payments, often changing their company name

financial-ombudsman.org.uk issue 135 August 2016 ombudsman focus: spotlight on scams 21

how much money was lost to scams in three months? LOST & FOUND

total money reported lost

most money lost to a single scam

average amount lost … average amount lost per victim

phone – cold calls about fake computer viruses £4,496

online – goods purchased not being received £1,304

mail – requests for upfront payments to release lottery winnings £5,763 based on 2,262 cases (45%) where Citizens Advice was able to assess the exact amount of doorstep – requests for upfront payments for money that had been lost, building, gardening and maintenance work that between October 2015 was never completed £2,953 and December 2015

financial-ombudsman.org.uk 22 issue 135 August 2016 ombudsman focus: spotlight on scams

how did people pay the scammers?

based on 2,167 Citizens over 50% of cases involved debit or credit cards – where victims Advice cases where payment are more likely to be able to get their money back through chargeback or method was known section 75 claims

16% involved bank transfers – which are convenient for transferring large sums of money quickly, but can make it difficult to trace where the money has gone

6% involved other money transfer and voucher payments which may be convenient for consumers who don’t want to give their personal details to make payments, but are untraceable or difficult to trace

Michael Ingram, In general, you need to be senior ombudsman a customer of the business at the Financial you’re complaining about. Ombudsman Service But in these kinds of fraud cases, we can also As this ombudsman look into certain aspects news highlights, of a complaint about the and scams take many “receiving” bank the money different forms. Over the was sent to. last couple of years we’ve seen a significant increase In most cases though, the in cases where people money is moved from have been tricked into the receiving bank within making payments. The minutes – and certainly circumstances in which before anyone realises Michael this happens are varied – anything is wrong. Sadly, in Ingram and, it seems, constantly nearly all the scams we see, changing – and can involve the victim has inadvertently payments made online, in done something that’s branch or over the phone. helped the scammer. For example, they may have given out their password, or given a fraudster remote access to their computer.

financial-ombudsman.org.uk issue 135 August 2016 ombudsman focus: spotlight on scams 23

We also see cases where The warning sign is that • Online sale and auction a consumer has made a they’re told to arrange sites rely on the parties payment themselves – things differently – for being able to prove goods logging in to their online example, collecting goods have been posted and paid banking and authorising at a “neutral” location for. If the buyer or seller the transaction to the instead of posting them, wants to do something fraudster’s account. or not using a trusted different, it might be a Afterwards, it’s easy to payment method that scam. see what went wrong. provides protection. • A bank or the police But it’s not always so Based on the things would never ask you to easy at the time. we’ve seen go wrong, get involved in a “sting” From my experience, it some simple things for operation to help them seems scammers are consumers to remember catch fraudsters. successful because the are: • A lot of personal victim is made to believe • A bank won’t ever ask information is widely something’s gone wrong you to transfer money available. Just because – and things are out of to a “safe” account. someone knows your name, control. And they’re then address, date of birth or told they can do something • A bank doesn’t need a account numbers doesn’t about it, to regain control. PIN or password to stop a mean they’re who they say suspicious payment – and For example, the fraudster they are. they can block a card might say there’s a security remotely, without taking it problem with someone’s from you. account – and persuade them to send their money • An internet service to a “safe” account, which provider won’t ask for is of course anything but access to a computer to fix safe. Or the scammer a problem with a router. might phone saying they’re from an internet provider, reporting a problem with the service. The victim’s told what they should do In some cases, we hear that people are getting to fix the problem – which phone calls from scammer pretending to be from usually means letting the Financial Ombudsman Service. The scammers the fraudster access falsely use our name to try to persuade people to the computer remotely, reveal details about their personal and financial allowing them access to circumstances. online banking. We never cold-call customers, or email or phone In other cases, the victim people out of the blue to ask for personal buys something online information. And we’ll never ask you for money, or that never arrives, or sells pay compensation to you directly. goods and is never paid.

financial-ombudsman.org.uk 24 issue 135 August 2016 ombudsman focus: spotlight on scams

proceedings; and, for As part of the ScamSmart the most serious cases, campaign we created an criminal prosecution. Last interactive tool, the FCA year, as a result of our Warning List, to help people actions, 8 people were avoid potential investment sent to jail for a total of 32 fraud. The FCA Warning years, we froze over £2.7 List is a list of firms and million, returned nearly individuals that the FCA £1.9 million to victims knows are operating and secured injunctions without its authorisation. and other orders against The web tool helps unauthorised firms and members of the public those behind them. We search this list, find out also issued public warnings more about the risks about 250 unauthorised Mark associated with an firms in order to deter Steward investment opportunity potential investment and find out further steps frauds. they can take to avoid Alongside enforcement investment scams. action, we also run Mark Steward, It also highlights that if communications activity director of members of the public to increase consumer enforcement and deal with firms that are awareness of investment market oversight not authorised they will fraud and the actions at the Financial not be able to access the consumers can take to Conduct Authority Financial Ombudsman avoid it. Our ScamSmart One of our priorities at Service or the Financial campaign targets those the Financial Conduct Services Compensation most at risk of investment Authority is to prevent Scheme if things go fraud. It stresses the financial crime, including wrong. Consumers are importance of rejecting protecting consumers from also encouraged to check unsolicited calls, unauthorised investment the FS Register, which checking our Warning activity and financial fraud. lists authorised firms and List and getting impartial individuals we know about. In 2015 we received over advice before making an 8,500 reports about investment. potential unauthorised The campaign includes activity. We assess all advertising, information on of these cases and we our website, press activity investigate and take action and communications on as many as we can. This through partners, to build includes taking civil court further awareness of the action to stop activity and risks posed by investment freeze assets; insolvency fraud.

financial-ombudsman.org.uk issue 135 August 2016 upcoming events 25

Only a limited number of investment frauds will fall within our remit, so effective coordination “As part of the ScamSmart campaign with other agencies and we created an interactive tool, the FCA a continued focus on prevention, including better Warning List, to help people avoid consumer education, is critical to achieving long- potential investment fraud” term success in this area. We continue to coordinate our efforts across our supervisory, intelligence and enforcement functions in our work on scams and, money returned to fraud in particular, those that victims in 2015 as a result are targeted at consumers’ £1.9m of FCA action pensions. For more information reports received by FCA visit www.fca.org.uk/ scamsmart. in 2015 about potential 8,500 unauthorised activity

upcoming events …

smaller business:

meet the ombudsman roadshow Glasgow 15 September Sheffield 19 October

For more information – and to book – go to news and outreach on our website.

Printed on Challenger Offset paper made from ECF (Elemental Chlorine-Free) wood pulps, acquired from sustainable forest reserves.

100% of the inks used in ombudsman news are vegetable-oil based, 95% of press chemicals are recycled for further use, and on average 99% of waste associated with this publication is recycled.

financial-ombudsman.org.uk 26 issue 135 August 2016

A few people at our community centre have been having difficulties registering a power of attorney with their bank. How can I help them sort things out? It so often seems to be a question of “computer says no”.

Seeing someone lose But equally, we’d expect If you’d like to talk through Q? mental capacity is likely to businesses to identify a specific situation, you be upsetting in itself. And and respond to difficult can phone our free helpline practical barriers to helping circumstances – and for businesses and people them manage their affairs to avoid unreasonable representing consumers on clearly won’t make things bureaucracy. To help 020 7964 1400. &A any easier. banks and their customers minimise inconvenience To protect their customers’ and stress, we’ve shared money, it’s only right that some tips on our website businesses will need to based on the kinds of have certain procedures problems we see. We’ve and safeguards in place. also explained how we can help if things go wrong.

My son is heading to university in a few weeks – and I’m worried he doesn’t know much about finance. Do you have any tips to watch out for based on the complaints you see from young people?

Being in control of your also relatively less likely to You can find case studies finances for the first know about their consumer on specific problems we’ve time can be a daunting rights – including the helped to resolve involving experience – whether it’s ombudsman. So wise younger people in our opening a new account, words from people with September 2015 edition managing income, or more experience – such as of ombudsman news. And keeping up with bills. sharing what we do and we’ve also shared helpful how we can help – can tips through social media As our latest annual review be very helpful in case and student publications shows, just 1% of the something does go wrong. like the gap travel guide. complaints we received last year were brought by Over the past year, we’ve people under 25. While that heard from young people might simply be because with a range of financial younger people haven’t problems – from opening yet used many financial student accounts to products or services, our insurance claims for research suggests they’re stolen phones.

ref: 1009/pc financial-ombudsman.org.uk