"BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police."
The FCA found that BOS "failed to be open and cooperative" and failed to disclose information appropriately to the regulator.
BOS identified suspicious conduct in the impaired assets (IAR) team in early 2007. The director of the team, Lynden Scourfield, had been sanctioning limits and additional lending facilities beyond the scope of his authority undetected for at least three years. BOS knew by 3 May 2007 that the impact of these breaches would result in substantial losses.
The FCA says that over the next two years, on numerous occasions, BOS failed properly to understand and appreciate the significance of the information that it had identified, despite clear warning signs that fraud might have occurred.
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.
It was not until July 2009 that BOS provided then regulator, the FSA, with full disclosure in relation to its suspicions, including the report of the investigation it had conducted in 2007. BOS did not report its suspicions to any other law enforcement agency. The FSA reported the matter to the National Crime Agency (then the Serious Organised Crime Agency) on 26 June 2009.
In 2017, following an investigation by Thames Valley Police, six individuals including Lynden Scourfield and another BOS employee, Mark Dobson, were sentenced for their part in the fraud.
BOS agreed to resolve the matter and qualified for a 30% stage 1 discount. Were it not for this discount the FCA would have imposed a financial penalty of £65,000,000.
The FCA has also today banned four individuals from working in financial services due to their role in the fraud at HBOS Reading: Lynden Scourfield, Mark Dobson, Alison Mills and David Mills.
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.”
