This is for failing to have in place systems to detect a series of high-risk, cash transactions worth approximately £2 million, which were undertaken in breach of their policies and procedures. These transactions appear to be suspicious and are currently being investigated by law enforcement.
Philip Robinson, financial crime sector leader at the FSA, said:
"Adequate systems and controls are fundamental to the UK anti-money laundering regime's effectiveness and firms must identify the money laundering risks in their business and take appropriate action to reduce these.
"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 in relation to the recognition and reporting of suspicious transactions."
The FSA found that between 1998 and 2002, 40 bank drafts were issued for cash for one of the branch's largest customers. The drafts were made payable to the BoI and, because the identity of the owner of the cash was disguised, were an effective means of money laundering. Bank staff that were aware of the circumstances of the transactions did not identify them as suspicious.
The cash used to purchase the bank drafts was deposited in an internal branch account without first passing through the customer's account. This practice, in breach of BoI's policies and procedures, 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 and source of the funds.
The transactions were outside the normal business activity of the customer and the customer had asked staff at the branch not to use the customer's name on any cheques or correspondence relating to the draft transactions, which failed to arouse suspicion.
BoI failed to detect the misuse of the draft facility until it was identified during a branch audit in March 2003, when drafts issued to the customer worth £1.8 million were found to be outstanding. There was a high risk that these transactions could have been used to facilitate money laundering and they are being investigated by the appropriate law enforcement agency.
The bank 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 the recognition and reporting of suspicious transactions.
The systems and controls to monitor the issuing of bank drafts and staff training were the same across BoI's branch network but the misuse of bank drafts only occurred in one branch. Upon discovering the breaches, BoI notified the FSA and has devoted significant resources to investigating the matter and ensuring that the misuse is not replicated elsewhere in the branch network. The bank has also taken steps to introduce a revised training programme that involves checking that staff understand their responsibility to recognise and report suspicious transactions.
