The Bank of Scotland was recently filed £45.5 million as fine for failing to manage a fraud case. The bank could not alert authorities upon receiving early indications of a fraud that led to a jail sentence for six people.
A case from 2007
The fines were related to a case from 2007. At the time, Lynden Scourfield worked as the head of the Impaired Assets team of the bank. According to the Financial Conduct Authority (FCA), the premier financial regulatory authority of the UK, Scourfield was aware that he was lending beyond his authority. However, he continued indulging in fraudulent practices and failed to act adequately.
10 years after the incident, Scourfield was jailed for 11 years. Five other individuals were also charged and jailed for participating in the fraud. The funds misappropriated by these people were used for luxury holidays and prostitutes.
Bank of Scotland was constituent of the Halifax Bank of Scotland (HBOS) when the fraud took place which was later absorbed by the Lloyds Banking Group in 2009. Interestingly, full information of the activities at the bank’s Reading branch, where the fraud took place, wasn’t provided to the regulators till July 2009.
Negligence became a CenterPoint of the fraud
According to an FCA statement about the case, there was no evidence that anybody who could have caught the fraud realized or “even thought about” the consequences of not bringing the matter to the regulator’s notice. The regulator also said that there wasn’t sufficient inquiry, scrutiny, or challenge from anyone, anywhere in the organization.
Police investigation revealed that six individuals the six individuals used profits on the funds they siphoned on several expensive items, luxury holidays, and prostitutes. David Mills and his wife Alison ran Quayside Corporate Services, and Scourfield told his clients to use the turnaround firm in exchange for bribes. This helped Mills and his associates’ high consultancy fees. Some businesses that were in perfect condition otherwise were told to use Quayside or their relationship with the bank will be in jeopardy.
Judge Martin Beddoe, who ordered a jail sentence for Scourfield in 2017 said that he had sold his soul for “sex,” “bling” and “for swag.” David Mills, a consultant at the bank was jailed for 15 years while Michael Bancroft was imprisoned for 10 years. Former HBOS manager, Mark Dobson received a four and a half years jail sentence. John Cartwright and Alison Mills received three and a half year sentences for money laundering.