The Pensions Ombudsman has upheld a complaint against Embark after it failed to prevent identity fraud which cost a client £20,000.
The complainant, identified in the ruling as Mr N, alleged Embark accepted fraudulent email instructions to withdraw £20,000 from his Sipp account in May 2019 and that he incurred a financial loss as a result.
As this occurred back in 2019, it predates the sale of Embark to Lloyds Banking Group and the company said its "fraud prevention systems have improved significantly since that time".
The case
Mr N explained Embark was the administrator of his Sipp and St James’s Place was his financial adviser.
On April 9, 2019, Mr N emailed Embark requesting the withdrawal of £20,000 from his Sipp.
In this email, Mr N indicated the money should be paid into the bank account Embark had on record for him.
On April 11, 2019 Embark confirmed the payment would be paid into the nominated account but afterwards Mr N’s email account was infiltrated by a fraudster.
The fraudster, impersonating Mr N, requested the payment be made into a different bank account.
Embark replied stating that, to change the bank details for the payment, Mr N needed to complete and sign an attached document.
Additionally, it asked for evidence in relation to the new bank account and asked for an original bank statement or a certified copy of a bank statement.
On April 25, the fraudster emailed Embark with what purported to be a certified bank statement that was signed and dated by an accountant.
Mr N safely received his payment of £20,000 that was paid on April 29, 2019.
But on April 30 the fraudster completed and returned to Embark new sale and income forms and, on May 13, Embark emailed the fraudster and confirmed that “a gross income payment of £20,000 will be paid to your nominated bank account by close of business on May 20 2019”.
Later that month, Mr N was informed by SJP that his Sipp account was showing withdrawals amounting to £40,000.
Mr N asked SJP to correct its records and the next day it emailed Embark to confirm the withdrawals made from the Sipp.
In August 2019, SJP emailed Embark and reported that Mr N’s email account had been intercepted and the fraudster had obtained £20,000 from his Sipp.
Later that month, there was an attempt to compensate Mr N for the loss he had incurred because of the fraud with Embark offering £12,202.20.
Mr N verbally agreed to this offer on the condition SJP would cover the shortfall but as SJP wouldn’t cover it, Mr N rejected the offer.
Mr N's case
Mr N stated that Embark had accepted the fraudster’s email instructions without seeking any written or telephone confirmation from him and then paid the fraudster.
As a result, he incurred a financial loss of £15,797.80, comprising of £20,000 less tax of £4,202.20 which Embark had deducted and returned to the account.
He asked for Embark to reimburse him for his losses, and for its internal procedures to be reviewed or enforced to prevent this situation in the future.
