I have quandry now.

Just before Christmas I got two emails from 'PayPal' informing me that £481 and £544 had been debited from my paypal account. I immediately assumed these were 'phishing' emails and deleted them. I checked my Paypal account and nothing seemed amiss, so I though no more of it.

In January my swipe card was declined and when I checked my balance it was empty. Further checking revealed £481 and £544 had indeed been debited from my account.

I panic'd and phoned the bank. I was told an account manager would look into it and call me back. I thought, they're probably going to tell me just to contact PayPal. I logged into Paypal and registered two disputed transactions. Paypal sent me the usual, we'll look into it emails. I had no idea how long that would take.

The Bank manager then rang back later that day. He, as expected, said I should contact PayPal but if I got no joy with them to get back to him and he could log some sort of Paypal indemnity (thing?) and I shouldnt worry. I said ok, but can you add some overdraft allowance onto my account, because it was the fact it was empty drew my attention to the problem and I didnt know how long Paypal might take. He said, look I'll log the indemnity now and the money will be back in your account by 5pm.

True to his word, £1025 was. Thank God.

Today, Paypal have very quickly found in my favour (the accounts must be known fraudulent) and returned £1025 to my Paypal account.

I now have £1025 extra and I'm not sure who it belongs to?

Are you saying that paypal and your bank both refunded the money?
If so, i would speak to both again and sort one a refund.
Ultimately, the bank will have taken the money from paypal, so they should get their money back one way or another

Would be possible to pass on the contact details of both parties so they can make up their minds between them?

Yes they both refunded the money. It was Paypals fault, so I presume their refund is the correct one. But indemnity insurance means that it wasn't a lend from the bank til sorted - its some sort of insurance Company the bank uses to indemnify that is at the loss?

Then they will both take the money back, and you'll be at Square 1

Close the Paypal Account down, and switch Banks

Give a man a gun and he can rob a bank. Give a man a bank and he can rob the Country.

To explain my quandry further you see - I have no qualms reimbursing the Unknown insurance Company. But I am reluctant to tell the bank just so the bank can have me return the money to them so they can keep it. Or is that just being too suspicious?

Or will the unknown insurance company attempt to get their money from Paypal who'll say they gave it to me? And who goes after the bustards who stole the £1025 in the first place? The Police will only go after them with an offical complaint - and none of Paypal, the bank or the insurance company will do that...

Just tell the bank. They'll sort it. Don't worry about the insurance co not getting their cash back. Highly unlikely that would ever happen.

Don't worry about the scrotes who stole the cash either. Life's too short.

You may well get asked to sign something to confirm that it wasn't you that withdrew the money at some point BTW, at least if the procedures are the same as credit card companies.