TheFinancial Services Authority (FSA) has
fined private bank BNP Paribas £350,000for
weaknesses in its systems and controls, which allowed a senior
employee to fraudulently transfer £1.4m out of clients' accounts
without permission.
This is the first time a private bank has been fined for
weaknesses in its anti-fraud systems.
The 13 fraudulent transactions were carried out between February
2002 and March 2005, using forged clients'
signatures and instructions and by falsifying change of address
documents.
During its investigation, the FSA found that BNP Paribas did not
have an effective review process for large transactions over
£10,000 from clients' accounts.
It also found that the bank's procedures were not clear about
the role of senior management in checking significant transfers
prior to payment. As a result, a number of fraudulent transactions
were not independently checked.
In addition, a flaw in the bank's IT system allowed the senior
employee to evade the normal Middle Office processes. This meant
that basic authorisation and signatory checks were not carried out
on internal cash transfers between different customer accounts.
Margaret Cole, FSA director of enforcement, said, "BNP Paribas’
failures exposed clients' accounts to the risk of fraud. Senior
management must make sure their firms have robust systems and
controls to reduce the risk of them being used to commit financial
crime.
"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."
The FSA said BNP Paribas had now improved its systems to stop
the same thing happening again.
In the last two years, the
FSA has fined Nationwide, Capita Group and Kyte for weaknesses
in their anti-fraud systems and controls.
Nationwide fine prompts drive to secure customer data
>>
High price of failing to tighten IT security >>
FSA website
>>
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