Paribas fined $700,000 over fraud

The private bank of one of France’s biggest banks – BNP Paribas – has been fined $700,000 (£350,000) for allowing a senior manager to steal money from clients.

The Financial Services Authority (FSA) said controls in the bank’s London office were so weak that the employee had been able to take $3m (£1.4m).

The theft took place in 13 stages between February 2002 and March 2005.

BNP Paribas Private Bank said it took the findings very seriously and it had fully co-operated with the inquiry.

“The case consisted of a former employee who abused their position by committing a sophisticated fraud against the Private Bank,” the bank said.

“No clients lost any money as a result of this fraud.”

he employee had forged the clients’ signatures on bogus instructions and falsified other bank documents.

Margaret Cole, FSA Director of Enforcement, said this was unacceptable.

“BNPP Private Bank’s failures exposed clients’ accounts to the risk of fraud,” she said.

“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,” she warned.

The FSA discovered that the BNPP Private Bank branch, which deals with wealthy customers, had had no effective method for checking transactions worth more than $20,000 (£10,000) from its clients’ accounts.

This meant that basic checks on signatures and authorisations were not applied to internal transfers between different customer accounts.

The regulator said the theft was particularly serious because the bank’s slack controls had let the fraud take place over a long period of time, during which it had also failed to detect an attempted cover-up.

The bank had also been slow to improve its controls once the matter had come to light, the FSA said.

BNPP Private Bank said that a comprehensive review had since been conducted, “involving an independent report that verified our processes, systems and controls, which we now consider to be amongst the best in the industry”.

This is the first time that a bank dealing with private customers has been fined because of poor measures to prevent fraud.

But the regulator’s action is in a long line of fines levied on financial organisations generally.

In the past two years the FSA has also fined the Nationwide building society, Capita financial administrators, and the Kyte financial trading firm, for having weak internal anti-fraud controls.

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