The Financial Conduct Authority (FCA) has fined Bank of Scotland (BOS) £45.5m for failures to disclose information about its suspicions of fraud at the Reading-based Impaired Assets (IAR) team of Halifax Bank of Scotland. The FCA found that BOS failed to be open and cooperative and failed to disclose information appropriately to the then regulator, the Financial Services Authority (FSA).
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.’
The regulator said that for over two years Bank of Scotland failed properly to understand and appreciate the significance of the information that it had identified despite clear warning signs that fraud might have occurred. There was insufficient challenge, scrutiny or inquiry across the organisation and from top to bottom. At no stage was all the information that had been identified properly considered. There is also no evidence anyone realised, or even thought about, the consequences of not informing the authorities, including how that might delay proper scrutiny of the misconduct and prejudice the interests of justice.
It was not until July 2009 that the bank provided the FSA with full disclosure. In 2017, after an investigation by Thames Valley Police, six individuals including Lynden Scourfield and another bank employee, Mark Dobson, were sentenced for their part in the fraud. The FCA has banned four individuals from working in financial services due to their role in the fraud at HBOS Reading: Lynden Scourfield, Mark Dobson, Alison Mills and David Mills.
For the full details visit the FCA website.
Parent company Lloyds Banking Group said that since the acquisition of HBOS, the Group has ensured tighter controls, more robust risk management and an entirely different culture than was evident during the fraud. António Horta-Osório, Chief Executive of Lloyds Banking Group, described 2007 to 2009 as a dark period in HBOS’s history, prior to its acquisition by Lloyds. “I want to apologise once again for the very deep distress caused to the customers affected by the HBOS Reading fraud. The perpetrators of the fraud rightly went to jail for the crimes they committed. The Group’s management team has been committed to putting things right. In 2017, once clear of our obligations not to prejudice the criminal trial, we launched the Customer Review led by Professor Griggs to provide fair compensation for victims. We have now made offers to all customers in the review and 98 per cent of those offers have been accepted.”
