Abbey National could be in line for another fine for breaches of the Financial Services Authority's regulations, just six months after it received a £2.3m penalty for falling foul ofmoney-laundering rules.
The bank is set to come under the FSA's spotlight again after the arrest of an independent financial adviser (IFA) who is alleged to have defrauded his clients by covertly transferring more than £1.2m of their savings into his own Abbey bank account. Clients of the adviser allege that they were asked to make cheques payable to Abbey, which they believed were being paid into savings accounts under their own names. Instead, however, the IFA is alleged to have convinced Abbey to pay the money into his own account.
The process is alleged to have been repeated many times, involving about 20 clients over more than a decade. However, Abbey is believed to have taken no steps to prevent the practice.
A financial regulation expert from one of the top four accountancy firms said that banks are obliged to have systems in place to spot abnormal account activities, and to ensure they know their clients. He said that if steps were not taken to challenge the IFA over the repeated use of the unusual method of payment and over the large sums of money flowing in and out of his account, the bank could be found in breach of FSA regulations and would be likely to receive a fine. He added that it was possible that Abbey would fall foul of the same money-laundering regulations they were found in breach of last year.
The news will come as an embarrassment to the FSA, having seen an offender slip through the net so soon after it was penalised for breaches of its regulations.
The expert added that such practices could not have taken place through any of the major clearing banks. However, he said the antiquated systems of the former and current building societies were not always as robust.
The clients of the IFA are now calling for compensation from Abbey, and are threatening to sue if the bank does not pay up. They are arguing that having made their cheques payable to Abbey, it was the bank who was ultimately responsible for paying them to the wrong person.
One client told The Independent how he lost £28,000 through the alleged fraud. Abbey and the FSA said they were unable to comment.Reuse content