FSA hits BNP Paribas with £350,000 fine after employee robbed clients

BNP Paribas, the French investment bank, was yesterday fined £350,000 for failing to prevent a senior employee fraudulently removing £1.4m from clients' accounts.

The Financial Services Authority (FSA), the UK's chief City regulator, said the employee, a manager, had been able to exploit serious weaknesses in the systems and controls at BNP's private banking division, which is based in London.

As a result, the manager was able to move money out of client accounts on 13 occasions from February 2002 to March 2005. The employee behind the fraud forged clients' signatures and falsified changes of address in a bid to steal £1.4m.

BNP did not have proper systems in place clearly requiring senior managers to check and authorise large transactions, the regulator said. In addition, the FSA said the bank's computer systems enabled senior staff to get round normal authorisation checks.

The regulator said it had been particularly concerned about the amount of time it took for the frauds to come to light, especially as it had previously warned the bank its money laundering controls needed improvement. In addition, the bank initially failed to spot the employee's attempts to cover up the illegal transfers.

Margaret Cole, director of enforcement, said the FSA was keen to send a message to other banks.

"BNP Paribas Private Bank's failures exposed clients' accounts to the risk of fraud - this is unacceptable particularly with the overall increase in awareness around fraud and client money risks," she said. "This is a warning to other firms that we are raising our game in this area and expect them to follow suit."

Under FSA rules, BNP qualified for a 30 per cent discount on the fine because it had admitted the failings at an early stage in the regulator's investigations. It also ensured no client lost out as a result of the fraud.

"The case consisted of a former employee who abused their position by committing a sophisticated fraud against the Private Bank," a spokesman for BNP said. "No clients lost any money as a result of this fraud."