Bank of Scotland has been fined £45.5m for waiting over two years before revealing its suspicions of fraud occurring at the Reading-based Impaired Assets (IAR) team at Halifax Bank of Scotland.
IAR director Lynden Scourfield was among six former bankers who were jailed in 2017 after approving inappropriate loans for struggling businesses.
The bank apparently identified suspicious conduct in Impaired Assets team in early 2007, but it wasn’t until July 2009 that Bank of Scotland fully disclosed its suspicions to then-regulator, the Financial Services Authority. The FCA said the regulator should have been notified in May 2017.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent.
“BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police.
“There is no evidence anyone properly addressed their mind to this matter or its consequences.
“The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.”
In 2017, following an investigation by Thames Valley Police, Lynden Scourfield and another BOS employee, Mark Dobson, were sentenced for their part in the fraud committed through the IAR.
The FCA today also banned Lynden Scourfield, Mark Dobson, Alison Mills and David Mills from working in financial services due to their role in the fraud at HBOS Reading.
Commercial lending was and still is largely unregulated in the UK, which meant that the activities of IAR were not subject to specific rules imposed by the FSA.
However, there was in breach of conduct of business rules and complaints handling rules.
For agreeing to resolve the batter Bank of Scotland qualified for a 30% discount on a financial penalty of £65m.