Britain's Financial Services Authority (FSA) today fined Bank of Ireland £375,000 sterling for failing to have in place systems to detect a series of high-risk, cash transactions worth about £2 million that were undertaken in breach of their policies and procedures.
These transactions appear to be suspicious and are being investigated by the police.
Mr Philip Robinson, financial crime sector leader at the FSA, said "These transactions were high-risk in terms of providing scope for money laundering and were in breach of BoI's policies and procedures. Furthermore, they continued for a period of four years."
He added that the bank did not establish adequate systems and controls to monitor the issuing of bank drafts and did not check that its staff understood fully their anti-money laundering responsibilities in relation to the recognition and reporting of suspicious transactions.
The FSA found that between 1998 and 2002, 40 bank drafts were issued for cash for one of the branch's largest customers.
The drafts were made payable to the bank and, because the identity of the owner of the cash was disguised, were an effective means of money laundering.
Bank staff that were aware of the circumstances of the transactions did not identify them as suspicious.
The cash used to purchase the bank drafts was deposited in an internal branch account without first passing through the customer's account.
This practice, in breach of BoI's policies and procedures, allowed the customer to use the drafts outstanding account as a deposit account, which could have prevented law-enforcement agencies from establishing the true owner and source of the funds.
Bank of Ireland failed to detect the misuse of the draft facility until it was identified during a branch audit in March 2003, when drafts issued to the customer worth £1.8 million were found to be outstanding.
The systems and controls to monitor the issuing of bank drafts and staff training were the same across Bank of Ireland's branch network, but the misuse of bank drafts only occurred in one branch.
However the FSA noted that once notified of the breach, Bank of Ireland devoted "significant resources to investigating the matter and ensuring that the misuse is not replicated elsewhere in the branch network".