Wednesday, 16 December 2009

China bank fraud shock - not

When I saw the headline that the Royal Bank of Scotland was investigating fraud at its China operations my initial thoughts are "what took so long".

All banks in China have to accept fraud as an occupational hazard. This is a problem that will not go away quickly.

If UK and US banks expect bank workers to have the same ethos and culture as their UK counterparts then they have a lot to learn.

Each bank should have a specialist fraud team working continuously. The costs will more than compensate. Banks also need to ensure that the anti-fraud team is changed every three years otherwise you can all guess what will happen.

Foreign banks cannot say they have not been warned.

RBS investigates ‘irregularities’ in its China unit [FT]

Royal Bank of Scotland is investigating suspected fraud in its China unit after recently discovering “potential irregularities” in its commercial banking business.

The bank on Wednesday said the probe related to a small number of accounts within the small and medium size banking business at ABN Amro China.

Local media reported last month that the alleged fraud may have resulted in client losses of up to Rmb20m ($3m).

ABN Amro China declined to comment on the scale of the potential losses. The bank has reported the matter to China’s banking regulator, which is also investigating.

People familiar with the matter said that the individual concerned had been suspended pending the outcome of the inquiry.

“Any dishonest behaviour by bank staff is completely unacceptable... and will be taken extremely seriously,” one person close to the bank said. “Safeguarding the interests of our clients is our top priority and, as an international bank, the controls we have in place are in line with the widely accepted industry standards.”

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Banks in China have suffered a number of fraud cases in recent years, leading to frustration among regulators.

The AFP news agency this month reported that Yan Qingmin, head of the Shanghai branch of the China Banking Regulatory Commission, had criticised foreign banks during a recent meeting for ignoring risk in their local operations and urged them to carry out better internal checks.

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