The Financial Services Authority has slapped a £350,000 fine on a private bank - and warned other firms they face large penalties if their anti-fraud systems are found wanting.
The FSA says BNPP Private Bank had such weak controls that a worker was able to steal £1.4m from clients’ accounts.
The bank failed to have an effective review process for large transactions, and its procedures were not clear about the role of senior management in checking significant transfers prior to payment.
On top of that, a flaw in the bank's IT system allowed a senior employee to evade the normal Middle Office processes. It meant basic authorisation and signatory checks were not carried out on internal cash transfers between different customer accounts.
The unnamed senior employee forged clients’ signatures and falsified change of address documents 13 times between February 2002 and March 2005.
"BNPP Private Bank's failures exposed clients' accounts to the risk of fraud,” says Margaret Cole, FSA director of enforcement.
“This is unacceptable particularly with the overall increase in awareness around fraud and client money risks.”
The watchword has warned bosses of financial firms that they will carry the can for fraud failings.
“Senior management must make sure their firms have robust systems and controls to reduce the risk of them being used to commit financial crime,” says Cole.
“This is a warning to other firms that we are raising our game in this area and expect them to follow suit. We will not hesitate to take action against any firm found wanting.”
BNPP Private Bank's failings were serious, says the FSA, because they allowed significant fraud to take place and failed to detect subsequent transfers to cover it up for a long period of time.
The bank also failed to improve its procedures for monitoring large transactions or carry out remedial action on a timely basis.
This was despite the bank being aware that some of its procedures required improvement as a result of an FSA visit in relation to money laundering systems and controls in August 2002 and subsequent internal reviews.
BNPP Private Bank qualified for a 30% discount under the FSA's executive settlement procedures by agreeing to settle at an early stage of the investigation.
In the last two years, the FSA has fined Nationwide building society, the Capita Group and Kyte for weaknesses in their anti fraud systems and controls.
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