BoI fined €550,000 in laundering probe

BANK of Ireland has been hit with a €550,000 fine by Britain’s financial regulator for failing to spot suspected money laundering by a customer in Scotland.

The Financial Service Authority (FSA) severely criticised the bank for failing to detect the breaches on a number of occasions and said it was concerned that the customer involved was laundering money for either a criminal or terrorist organisation. Police in Britain are currently investigating the customer.

Financial regulators around the world have been tightening regulations since the September 11, 2001 attacks to keep banks from being used to finance terrorism. Royal Bank of Scotland Group Plc in Britain and Riggs Bank NA in the US are among lenders that have been fined for failing to comply with money laundering rules.

Around 40 transactions totalling €2.6 million were found to be suspicious.

The FSA said that between 1998 and 2002 a customer presented cash at the bank and turned it into drafts payable to the Bank of Ireland, concealing the identity of the customer.

The bank drafts were then deposited in an internal branch account without first passing through the customer’s account, which was a breach of the bank’s own policies and procedures. This allowed the customer to use the drafts outstanding account as a deposit account, which could have prevented law enforcement agencies from establishing the true owner of the funds and whether it was a breach of money laundering laws.

The FSA said that bank staff were aware of the circumstances of the transactions but did not identify them as suspicious.

Philip Robinson, financial crime sector leader at the FSA, said in a statement: “These transactions were high-risk in terms of providing scope for money laundering and were in breach of BoI’s policies and procedures. Furthermore, they continued for a period of four years.

“BoI did not establish adequate systems and controls to monitor the issuing of bank drafts and did not check that its staff understood fully their anti-money laundering responsibilities.”

The misuse of the draft facility did not come to light until March 2003 during a routine audit of the branch. The FSA said that since then the BoI has devoted significant time and resources to rectify the situation.

Bank of Ireland said it regretted the breach of its procedures and is fully committed to meeting its obligations to the FSA Rules & Principles.

A spokesman for BoI would not comment on whether any of the bank’s staff had been sacked or disciplined over the errors.

Although the customer was not named, the FSA said it was one of the largest customers of the branch, which had also not been identified. It is not known if the customer held a business or personal bank account.

Last year Bank of Ireland’s financial investment advice subsidiary Chase De Vere was fined €235,000 for approving and issuing a misleading direct offer promotion.