The Bank of Scotland have been fined £45.5m for not alerting the authorities to early indications of a fraud which jailed six people. The fines relate to an incident in 2007 by the head of the bank’s impaired assets team, Lynden Scourfield.
The Financial Conduct Authority (FCA) have announced the bank knew he had been authorising lending beyond his authority but the bank had failed to act properly. In 2017, Scourfield was sentenced to 11 years in jail.
Five other individuals were jailed for taking part in fraud in which funds were spent on luxury holidays and personal expenses. Bank of Scotland at the time of the fraud as part of Halifax Bank of Scotland (HBOS), which became part of the Lloyds Banking Group in 2008.
FCA have said despite the bank’s knowledge of Scourfield’s activities they did not give full information to regulators until 2009.
In a statement, FCA said: “There is also no evidence anyone realised, or even thought about, the consequences of not informing the authorities, including how that might delay proper scrutiny of the misconduct and prejudice the interests of justice,”
“There was insufficient challenge, scrutiny or inquiry across the organisation and from top to bottom,” it said.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Bank of Scotland failed to alert the regulator and the police about suspicions of fraud at its Reading branch when those suspicions first became apparent. BOS’s failures caused delays to the investigations by both the FCA and Thames Valley police.
“There is no evidence anyone properly addressed their mind to this matter or its consequences. The result risked substantial prejudice to the interests of justice, delaying scrutiny of the fraud by regulators, the start of criminal proceedings as well as the payment of compensation to customers.”
Lynden Scourfield, Mark Dobson, Alison Mills and David Mills are all banned from working in financial services due to roles in the fraud.
Chief executive of Lloyds, Antonio Horta-Osorio, responded: “We take today’s enforcement notice very seriously.
“2007-2009 was a dark period in HBOS’s history, prior to its acquisition by Lloyds Banking Group.
“I want to apologise once again for the very deep distress caused to the customers affected by the HBOS Reading fraud.
“The perpetrators of the fraud rightly went to jail for the crimes they committed.
“The group’s management team has been committed to putting things right. In 2017, once clear of our obligations not to prejudice the criminal trial, we launched the Customer Review led by Professor Griggs to provide fair compensation for victims.
“We have now made offers to all customers in the review and 98% of those offers have been accepted.”
