City of London police inquiry adds to RBS investigations

As SFO investigate, bank boss pledges to share £1m report with regulators

Nick Goodway,James Moore,Jim Armitage
Wednesday 27 November 2013 12:10
The Serious Fraud Office has confirmed that it is investigating allegations that Royal Bank of Scotland defrauded viable SMEs
The Serious Fraud Office has confirmed that it is investigating allegations that Royal Bank of Scotland defrauded viable SMEs

The City of London Police is investigating allegations of wrongdoing by Royal Bank of Scotland, it emerged on Wednesday night, adding to the Serious Fraud Office’s inquiry.

The financial capital’s economic crimes department has been examining the bank’s behaviour following at least one complaint from an alleged victim who contacted The Independent. The businessman is in a civil court dispute with the bank over the alleged seizing of his assets and has presented the City of London police with a large dossier of paperwork supporting his case.

News of the widening examination of RBS’s practices came as its chief executive pledged to “fully investigate” what he said were “serious allegations” that the bank defrauded companies that were its clients by forcing them to go bust.

Ross McEwan spoke as it emerged that the case is being investigated by the Serious Fraud Office. The allegations were levelled in a sharply critical report by the government adviser Lawrence Tomlinson.

Mr McEwan, who replaced Stephen Hester as chief executive, pledged to “share” the findings of a review he has commissioned into the bank’s business practices which will be led by a regulatory partner at City law firm Clifford Chance. It could cost RBS more than £1m. A spokesperson from the SFO said: “We are aware of the issue and are monitoring the situation. As far as any criminal investigation is concerned we can neither confirm nor deny this. ”

The SFO has received a dossier from and interviewed Neil Mitchell, a former chief executive of Torex Retail. He was the whistleblower at the former AIM-listed software company which resulted in the jail sentences for two of its former directors for duping shareholders by using false invoices to boost its profits. At the time, RBS led its syndicate of lenders. Mr Mitchell said that he had been in regular contact with a senior intelligence officer at the SFO over the behaviour of RBS towards the then reeling company since November last year. Recently he made a two-hour presentation to SFO officials. He believes the squad has broadened its investigation to look at the alleged wider system of abuse by RBS. He aired concerns at the bank’s AGM last year and held talks with chairman Sir Philip Hampton.

Mr McEwan said the Clifford Chance review would be shared with regulatory agencies including the Financial Conduct Authority and the Prudential Regulation Authority: “It is important to note that the most serious allegation that has been made is that RBS conducted a ‘systematic’ effort to profit on the back of our customers when they were in financial distress. We do not believe that this is the case, but it has nonetheless done serious damage to RBS’s reputation. No evidence has been provided for that allegation to the bank. The review will investigate the claim fully and I will report back on its findings.”

Mr Tomlinson said RBS had been “unnecessarily engineering a default” at ailing companies to move them to its Global Reconstruction Group where the bank charged punitive fees, increased its interest rates and seized assets at prices well below their market value.

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