The Governor and Company of the Bank of Ireland

FCA action

fine

1

in fines

£375k

most recent

August 2004

• Fined £375,000 on 31 August 2004

  1. On 31 August the FSA imposed a financial penalty of £375,000 on the Governor and Company of the Bank of Ireland (BOI) for breaches of SYSC 3.2.6. REASONS FOR THE PENALTY 2. In the period from December 2001 to May 2003, the Bank of Ireland (BOI) breached SYSC 3.2.6 by failing to take reasonable care to establish and maintain effective systems and controls to counter the risk that BoI's bank drafts facility might be used to further financial crime and for ensuring that staff understood their anti-money laundering responsibilities in relation to the recognition and reporting of suspicious transactions. 3.BoI demonstrated serious failings in that: (1) BoI failed to take reasonable steps to detect the misuse of the bank drafts facility provided by a BoI branch(the Branch). The misuse concerned forty bank drafts issued between 1998 and 2002 worth approximately £2,000,000. These bank drafts were issued for cash at the request of the Branch's largest customers (the Customer). All 40 bank drafts were made payable to the Bank of Ireland. These transactions were in breach of BoI's policy and procedures. Issuing bank drafts in this manner disguised the identity of the beneficial owner of the cash and, as such, was an effective means of laundering money. These transactions were not identified as suspicious by the staff at the Branch or by other managers who were aware of the transactions. (2)The systems and controls employed by BoI to monitor the issuing of bank drafts at BoI branches were inadequate despite bank drafts being identified by BoI as a potential method of money laundering in 1994. In particular, these controls did not require a full assessment of whether bank drafts were issued in accordance with BoI's policies and procedures. (3)BoI did not take appropriate steps to ensure that it had in place a system to check that staff had understood the money laundering training that was delivered to them, specifically that they had sufficient understanding to recognise and report suspicious transactions. The FSA accepts that the content of the training provided to staff was adequate. (4)There was a high risk that these trainsactions could have been used to facilitate money laundering. The circumstances in which the bank drafts were issued have resulted in an investigation by the appropriate law enforcement agency. 4 The FSA recognises that, although the systems to prevent the misuse of drafts and to ensure staff understood their anti-money laundering resplonsibilities were the same across the BoI's branch network, the material misuse of drafts only occurred at the Branch. The FSA considers that the failures demonstrated by the Branch are a material breach of SYSC 3.2.6.