The Financial Conduct Authority (FCA) said on Friday that it is issuing the Bank of Scotland (BoS) with a £45.5 million ($57.6 million) fine for failing to tell the regulator that it was suspicious of fraudulent activity at one of its offices in Reading, just outside of London.
From 2003 to 2007, the director of the impaired asset team at the Reading branch of Halifax BoS, Lynden Scourfield, gave out high-risk loans to companies.
He would then direct those companies to work with his friend, David Mills, who would provide bogus consultancy services to them. A Financial Times report from 2018 claims that Mills “charged exorbitant ‘consultancy’ fees and expenses while running companies into the ground.”
For directing clients to Mills, Scourfield was rewarded with visits to high-class prostitutes, expensive holidays and an American Express card for his own expenses. The banker allegedly rented out an apartment in which he kept a stash of viagra, both of which he used to have orgies with escorts.
Mills, along with his wife Alison and business partners Michael Bancroft and John Cartwright, raked in millions of pounds from their bogus consultancy fees which they then used to buy property across Europe, a yacht and holidays in Barbados.
Following an investigation by local police, in 2017 Mills was jailed for 15 years, Bancroft for ten years and Cartwright for three-and-a-half years.
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Mills’ wife Alison also received a three-and-a-half year sentence and Scourfield for 11 years. Another Halifax BoS banker, Mark Dobson, was sentenced to four-and-a-half years in jail.
The FCA’s decision on Friday means that Scourfield, Dobson and the Mills couple will be banned for life from working in financial services.
The BoS fine comes as the bank was aware of the fraudulent activity, which eventually led it to write off £245 million from Scourfield’s loan book, but did nothing when it uncovered it back in 2007.
“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,” said Mark Steward, the FCA’s executive director of enforcement and market oversight.
“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.”