Bank of Scotland Receives £45.5m Fine From FCA
The Financial Conduct Authority has issued a £45.5m fine to Bank of Scotland plc after it failed to report suspicions that fraud had occurred in one of its branches.
At the time the event took place the FCA (then the Financial Services Authority (FSA)) did not have specific rules governing such activity. However, FCA has held that Bank of Scotland had a “fundamental obligation [to] deal with its regulators in an open and cooperative way and disclose appropriately anything relating to the firm of which those regulators would reasonably expect notice.” This obligation applied to both regulated and unregulated activities.
Between 2003-2007, FCA found that Bank of Scotland had lent sums of money to distressed businesses who, in some cases, were unable to repay the loan. In return, the bank director at the time, Lynden Scourfield, received money, gifts and other benefits from a third-party turnaround consultant who he frequently put such customers in touch with.
After these issues were revealed, FSA obliged the bank to keep it abreast of any failures or where any suggestion of fraud was identified. However, Bank of Scotland failed to meet this disclosure obligation when potentially fraudulent activity arose. FCA agreed that the bank had not deliberately failed to meet its obligations, however “there was insufficient challenge, scrutiny or inquiry across the organization.”