If Fraud - Do I get my money back?

I have copied this Moneything's website-

'Just the thing for competitive P2P lending and borrowing

Put simply, we give borrowers access to capital and lenders a better return on their money. We’re committed to giving everyone a fair deal and speedy, personal service.



Your capital is at RISK and is not protected under the Financial Services Compensation Scheme.'



Lendy say this

'All loans made through Lendy's platform are secured on UK property; however, your capital is at risk should a borrower default. Funds lent through a peer-to-peer website are not covered by the Financial Services Compensation Scheme (FSCS). Remember, past performance is not a guarantee of future performance. With all investment, capital is at risk. Please obtain independent advice if you are in any doubt as to whether this platform is suitable for you or if you require tax advice. Please review our full risk assessment here...'

I think the purpose of it being FCA regulated is that it ensures certain procedures and safeguards must be put in place to protect client money. However, it only really works if the company is honest. If they are dishonest then nothing is protecting you. 

Re FSCS, I believe masonic has the two major instances above.

Re client accounts - these must be audited as fca requirement (even if the p2p co itself does not require audit as a small company). On the way in, investors are checked for kyc/aml to make sure they're authentic and those monies can only be transferred out to a linked account. So the safeguards are that we pay direct to a segregated bank account for clients (ie it is not the p2p own co account) that could not be emptied out to the directors' or co account. This is a precondition of authorisation and is externally audited.

Re loans, I invest in asset backed loans, these can be verified to external sources such as CH and LR that they exist and legal charges are put in place. Existence checks and charges can also apply to business lending. Not sure how you could independently verify consumer lending to anonymous borrowers other than making sure the co has all relevant permissions in place.

So there are safeguards and there are external checks/evidence but if someone really wanted to commit fraud then possibly no regulator could stop that. We would still have legal charges on assets and they should not have emptied the remote client account (without insider bank fraud) so it would be unsecured creditors most at risk.

Speed need or process are reasons to keep some cash on platform.

For secondary market trading one normally needs the cash on account before one can grab a bargain. For other platforms that automatically decide where your money will go it is essential if you wish to participate in investment.

Or if a P2P platform has given advice but I am not aware of any that do

www.fscs.org.uk/news/2016/april/advice-to-invest-in-peer-to-peer-lending-may-now-be-covered-by-fscs/

So you could say we have a similar level of protection to other financial platforms such as share trading platforms?

If I invest on a share dealing platform, but my money is never put into a client account and instead goes towards the purchase of a new yacht of the Directors, I'm don't have any recourse to any compensation? Even though the FCA has said the company is fully authorised and regulated ?

I wonder if compulsory insurance against fraud would be a good idea. The risk (and thus the premiums) much surely be low for such a thing?

Thanks for the link but it seems to be more about miss-selling insurance rather than fraud.