The Facts
Investor targeted by payment redirection scam
In a case study reported in 2016 by the UK Financial Ombudsman, an investor in the United Kingdom, Ms Q, fell victim to a payment redirection scam when she had her emails hacked by fraudsters, who impersonated her and sent emails purporting to be from her to her financial adviser.
Large sum transferred following receipt of emailed instructions
The emails asked the financial adviser to withdrawΒ βΒ£250,000 from her investment bond and transfer the money to a solicitorβs bank account in Hong Kong. However, the investment provider told the financial adviser that they could not trace the solicitorβs firm and so would not be transferring money to that account.
The financial adviser then received a follow-up email purporting to be from Ms Q, which provided details of a bank account in her name with a bank in the United Kingdom. The email instructed the financial adviser to transfer βΒ£250,000 to this bank account.
At this stage the investment provider pointed out that the bank account details were different to the ones they had on file for Ms Q. However, the financial adviser confirmed that the new bank account details were correct and finalised the transfer of the money to that account.
Investor realises her emails have been hacked
The investment provider then sent a letter to Ms Q, confirming that the βΒ£250,000 had been withdrawn and transferred to the new bank account in accordance with her instructions.
This was the first that Ms Q had heard of the transaction. Understandably, she was aghast and rang her financial adviser, who explained that he had completed the transaction in accordance with the instructions he had received from her via email.
Ms Q realised that her email account must have been hacked, so the financial adviser had been receiving emails which came from Ms Qβs email address, but which she had not sent herself.
Investor recovers some, not all of her money
After Ms Q reported the fraud to the police, she managed to recover around βΒ£170,000, leaving her with a shortfall of βΒ£80,000. Ms Q asked the financial adviser to make up this shortfall, arguing that it should have taken better care of her money.
When the financial adviser offered to pay only a quarter of the money that Ms Q had lost, the case ended up before the UK Financial Ombudsman, which had to determine whether the financial adviser was responsible for Ms Qβs loss.
Expert commentary on the court's decision
Financial Ombudsman finds in favour of Ms Q
The case involving Ms Q and her financial adviser was reported in the August 2016 edition of ombudsman news. (See case study 135/6.)
After examining the emails which the financial adviser had received from Ms Qβs email account, the Financial Ombudsman sided with Ms Q, agreeing that the financial adviser should have taken better care of her money and could have prevented the fraud.
The factor that was of central importance in the reasoning of the Financial Ombudsman was that the investment provider had notified the financial adviser that it could not trace the firm of the Hong Kong solicitors who were initially meant to receive the money.
Financial adviser told to pay full amount of unrecovered funds
In the Financial Ombudsmanβs view, βalarm bells should certainly have started ringingβ at this point and the obvious course of action for the financial adviser would have been to ring Ms Q to confirm her instructions.
The Financial Ombudsman ordered the financial adviser to pay the investment provider the full amount of the money which had not been recovered, so that Ms Q did not suffer any loss as a consequence of the scam.
Australian investors equally at risk of being scammed
While this case took place in the UK, there are similar cases that have been reported by the Australian Financial Complaints Authority (AFCA, previously the Financial Ombudsman Service, FOS).
In July 2025, AFCA reported an 18% increase in the number of complaints related to investments and advice in the 2024-25 financial year, with a total of 4,193 cases reported, up from 3,559 such complaints in 2023-24.
While Ms Qβs complaint related to investments, it also falls into the broader category of business email compromise and payment redirection scams, which involve hacking emails, impersonating the victim and intercepting and altering payment details.
AFCA has repeatedly warned that such scams can cause major financial losses, particularly in property settlements and large transactions.
We continue to remind our clients that scammers are increasingly skilled at hacking email accounts to impersonate conveyancers or real estate agents, and giving false account numbers to divert the money intended for home deposits or business payments.
For this reason we urge you not to rely on emails alone, but always verify bank account details over the phone before making or receiving money transfers.
For more information please see the articles below.
Protect yourself against payment redirection scams
Business email compromise scams conning Australians out of millions
Can a vendor terminate a contract for sale of land if the purchaser mistakenly pays the deposit to a cybercriminal? Which case won?
βI lost my money in a cryptocurrency scam. My financial firm should have warned me.β Which case won?