Ten held in 'pounds 100m global bank fraud'

Former TSB premises used as front
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The Independent Online

Ten people, including eight Germans, were arrested yesterday in raids in the Devon resort of Torquay as part of an international investigation by the FBI, Interpol and the Serious Fraud Office into a pounds 100m global banking fraud.

Those arrested - the other two were British - were taken to Torquay police station for questioning. Police said that other arrests may be made.

Some of those arrested had lived in the Torquay area for up to 10 years, sources said.

The perpetrators of the alleged fraud appear to have been running a network of 200 companies, many of which had respectable names in order to encourage investors to leave their money with them or pay fees up front for loans which were never advanced.

Police said the group operated an apparently legitimate bank from the abandoned office of a former TSB building on Torquay's main shopping street. For the last few months, the suspects are thought to have operated a currency exchange service, sold suspect corporate bonds and provided other seemingly legitimate banking services, police said.

During the raids, the authorities seized boxes of computer and paper records. "We decided, after several months of investigation, that we needed to make a raid before word got out and material was destroyed," a police spokesman said.

Among the items seized was a corporate bond with a purported face value of 10 trillion US dollars. Devon and Cornwall's Assistant Chief Constable, John Albon, said: "The bond had 13 noughts on it. Our guys had never seen anything with that many noughts on it before.

"It appears that the group was operating an illegitimate bank, most of it electronic, that was able to find victims in Germany and the US. It looks like they were able to use the international banking system for their own purposes," he said. The assistant chief constable said the fraud may also have involved organised crime. "We're just at the tip of the iceberg now," Mr Albon added.

Sources said that a Delaware-registered company appeared to be at the centre of the fraud. Delaware has notoriously lax disclosure requirements for companies registered there.

The company, which has been in operation for almost a year, had offered private and corporate investors multi-million pound loans and ordinarily charged a fee for the loan first. Once this was paid the customer would receive a certificate of deposit which, it said, would enable a loan to be arranged at another bank. When customers tried to arrange their loans they were told that they could not do so because the company concerned was not a recognised bank, sources said.

The victims appear to be wealthy individuals and institutions based overseas, mainly in Europe and the US.

"The first indications are that the victims are likely to have lost all their money," a spokesman for the Devon and Cornwall police said, adding that there was nothing to indicate that people in Torquay had been defrauded.

Mr Albon said: "It won't be known for some time how many of those arrested will be charged, or when. Any operation of this nature creates particular difficulties for the police. It is resource intensive, has international connotations and the offences often fall into various areas of jurisdiction."

Another police spokesman said: "We have no idea why these people appear to have settled here, except that it is a rather nice place to live. This is the largest financial fraud we have ever investigated."

The properties raided include the former TSB building which appears to have been the local base for the group. A bureau de change, a consumer credit venture, a Caribbean real estate business and an office rental business operated from the premises.

Police said that they have been investigating the fraud for several months following a complaint by a local resident. Sixty officers were involved in the investigation.