Bank of England knew of fraud alert

Fears over financial firm surfaced three years ago, reports David Hellier
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The Independent Online
The Bank of England and other leading financial institutions were warned three years ago that questions were being raised about one of the banking names, Allgemeine Handels und Effectenbank AG, that has featured in the multi-million alleged banking fraud in Torquay.

Ms Lin Kuo, assistant director of the commercial crime bureau of the International Chamber of Commerce, said that her agency was "aware of this operation some time ago".

Earlier this week Gerhard Martens, a director of the company and one of 12 people arrested, was charged with one count of dishonestly obtaining $622,500 (around pounds 400,000) and four of acting as a company director when legally disqualified.

The agency's members, which include banks, the Bank of England and other investors, pay an annual subscription fee which gives them confidential information on suspicious people or companies operating in the financial area.

It is believed that the company in question was investigated in 1992 and became inactive before re-emerging as an active financial company sometime earlier this year or late last year.

The Bank of England said last night that it was tipped off about the company in 1992 but says that it soon realised it would not be able to investigate the suspicions on its own and passed its findings on to other regulatory agencies.

It says that its interest in the affair has been peripheral and restricted to possible Banking Act offences.

Advance fee frauds of the kind alleged in Torquay - where investors are asked for a fee in exchange for a promise to arrange a loan that never comes to fruition - are thought to involve losses of pounds 1bn a year.

Investigators say they are notoriously difficult to track down.

Police have said that the Torquay operation, which is thought to involve around 200 companies, may have defrauded mainly German investors of more than pounds 100m.

Devon and Cornwall police said yesterday that a further two people were arrested on Thursday night and released on bail pending further inquiries into the affair.

The two were a 19-year-old British woman and a 26-year-old German from Newton Abbott, Devon. They have been told to report back to police at Torquay on 30 October.

So far 12 people have been arrested in and around the seaside town after a lengthy investigation involving 60 officers of the Devon and Cornwall police, the FBI, the Serious Fraud Office and Interpol.

The Devon and Cornwall police say that since the arrests a number of investors have made themselves known in the hope of regaining some of their investment.

Coopers and Lybrand, the UK accountants who have a fraud investigations unit, say they are also hoping to find some of the investors so that they can set up a fighting fund. It is not clear how much of the investors' money may be recoverable.

Earlier this week police officers said that they feared investors might lose all their money.

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