All financial advisers should take note of a recent judgement from the Financial Ombudsman Service (FOS), where a firm has been ordered to compensate a couple for losses they suffered after falling victim to a scam.
An adviser from advice network Positive Solutions received an email, supposedly from clients referred to as Mr and Mrs B, asking him to arrange a withdrawal of £250,000 from their Sterling investment bond. Crucially the clients had previously signed an undertaking allowing Sterling to accept instructions from their adviser on their behalf.
The adviser duly asked Sterling to facilitate the withdrawal. The provider initially queried with the adviser why payment was now to be made to a Barclays account held by a Hong Kong solicitor, instead of the Lloyds account that Mr and Mrs B had originally specified as their account. However, it appears that the adviser was not in any way suspicious of the change of account, and told Sterling that it would be fine to pay the withdrawal in to the Barclays account as that account had been mentioned in an email from the clients.
In his defence, the adviser would later mention that as Mr B had previously told him he intended to purchase a property, and as Mr B had previously worked in Asia, he had no reason to believe that the withdrawal request and the instruction to pay to a Hong Kong bank account was in any way dubious.
It eventually transpired that the clients’ email account had been hacked, and that the withdrawal request had not originated from Mr and Mrs B. The police were called in, but only managed to recover £185,000 of the £250,000 sum. This £185,000 was then re-invested into the bond once it had been recovered.
The couple made a complaint to the network about his failure to check that the withdrawal request was genuine, and Positive Solutions responded by offering them compensation of 25% of the lost amount of £65,000.
Mr and Mrs B were dissatisfied with this outcome and referred the matter to FOS. In a final decision, ombudsman Jim Biles instructed Positive Solutions to pay the couple compensation not just of the £65,000 sum lost, but also for the amount the £65,000 would have grown to had it remained invested.
Mr Biles’ judgement said:
“As a professional in the financial services industry, I think [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][the adviser] should be aware of the possibility of fraud and how this can be achieved and prevented. He had a long-standing relationship with Mr and Mrs B and could have called them.
“If the request was genuine, things would presumably have been cleared up quickly and I don’t think anyone could reasonably criticise the adviser for a short delay.”
Advisers who receive email requests from clients of this nature should always try and verify that the instruction is genuine. Any change of bank account should certainly be checked out.
Advice firms should maybe adopt a policy that no withdrawal instructions will be accepted unless the client is able to confirm the instruction orally.
It has been known for fraudsters to claim in their email that the client is abroad and thus unable to speak on the phone, although there is no indication this occurred in this case.
Neil Liversidge, managing director of West Yorkshire-based West Riding Personal Financial Solutions, recently went public on how he had caught a suspected pension scammer red-handed. He received an email, supposedly from a client, requesting to transfer a pension. However, he attempted to verify the request via phone and was told by the client that her email account had been hacked.
He then replied to the email asking the sender to attend his office, whilst also arranging for the police to be present. When she arrived, he asked her the nature of her relationship with the client who had seemingly made the request. The scammer gave a reply to the effect that she was acting on behalf of his client, who was in New York. Mr Liversidge pointed out that he knew his long-standing client was actually at home in Yorkshire, at which point the police entered and arrested the suspected scammer. Police investigations are ongoing.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]