Bank of Scotland has been fined £45.5m by the Financial Conduct Authority (FCA) over its failure to report a fraud at the Reading-based impaired assets team.
The watchdog found Lynden Scourfield, the head of the bank’s Impaired Assets team in 2007, had been sanctioning lending beyond his authority. It also found the bank was aware and failed to act properly.
Over the next two years, on numerous occasions, the FCA found the bank failed properly to understand and appreciate the significance of the information that it had identified despite clear warning signs that fraud might have occurred.
It found there was insufficient challenge, scrutiny or inquiry across the organisation. At no stage was all the information that had been identified properly considered.
The FCA said there was no evidence anyone “realised, or even thought about, the consequences of not informing the authorities”, including how it might delay proper scrutiny of the misconduct.
In February 2017, Scourfield was sentenced to 11 years in jail, while five other individuals were also jailed for their parts in the fraud.
At the time, Bank of Scotland was part of Halifax Bank of Scotland (HBOS), which became part of the Lloyds Banking Group in 2009.
It was not until July 2009 that Bank of Scotland provided the Financial Services Authority (FSA) with full disclosure in relation to its suspicions.
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. Bank of Scotland’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.”