Officials at AIB subsidiary Allfirst were concerned by the activities of currency trader Mr John Rusnak nearly three years ago, according to a report in the Wall Street Journal.
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Currency trader Mr John Rusnak
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The report says that colleagues of Mr Rusnak warned in a memo written in 1999 that he was gambling too much of his bank's money and exceeding risk limits.
The memo also said that Mr Rusnak was routinely overstepping his credit limit.
Last week AIB’s chief executive Mr Michael Buckley claimed the firm had no knowledge or Mr Rusnak's losses until this year.
The FBI and American banking regulators are investigating the allegation by AIB that Mr Rusnak lost $691 million in unauthorised foreign exchange deals since 1997.
The regulators are also looking at the controls put in place by the bank to prevent unauthorised trading and whether they were adequate.
Mr Rusnak's lawyers deny the 37-year-old stole from the bank and say he is co-operating with the inquiry.
Today the Wall Street Journal said the memo, written in mid-1999, warned that Mr Rusnak was exceeding the limits on his deals which put $2 to $3 million of the bank's money at risk each day.
Lapses had occurred roughly once every three months and prompted the bank to redesign the computer system used to monitor the risks taken by Mr Rusnak's foreign currency trading department to make it "faster and easier".
The improved programme was also installed on Mr Rusnak's computer to "hopefully avoid future over-limit situations", according to the memo. The memo specifically warned Mr Rusnak it was his duty to know how much of the bank's money was at risk at the end of trading each day.
Meanwhile Citibank is to investigate allegations that the Mr Rusnak colluded with one of its own currency dealers.
The move is in response to a report that investigators looking into the alleged fraud at Allfirst in Baltimore have found e-mails on a computer used by Mr John Rusnak that allegedly show he received help from an apparent Citibank accomplice.
Citibank said: "We've been co-operating with AIB and their auditors in their efforts to account for their transactions between Allfirst and Citibank. Allfirst has not raised with us any evidence or allegation of collusion. Obviously, any such allegation would be taken very seriously".
Investigators are reported to have recovered deleted emails from Mr Rusnak's computer in which a Citibank employee warned Mr Rusnak that the coverup of his scheme could not continue.
Citibank declined to comment further on its relations with Mr Rusnak. However, traders say it provided him with "prime brokerage" facilities. These included such services as settlement and clearing for trades and trade execution.
There is also speculation Citibank may have been one of the counterparties to whom Mr Rusnak sold "deep-in-the-money" options. Such options, which AIB says he never disclosed, allowed him secretly to raise large amounts of cash to cover losses he incurred in spot and forward foreign exchange markets, the Financial Timesreported.
Additional reporting by PA & AFP
