The trading activities of Mr John Rusnak, the rogue trader at the centre of the AIB fraud scandal, were under investigation for several weeks before the true scale of his deception became apparent, AIB said today.
Senior management at Allfirst Financial in Baltimore became concerned by the increasing amounts of cash required by Mr Runsak to cover his losses in a number of foreign exchange deals mainly in Far East markets.
AIB said today the fraud which involved writing ficticious options contracts to conceal losses in other currency deals had been going on for at least twelve months.
The internal investigation into the affair began several weeks ago and Mr Runsak who had been suspended from trading activities in early January was co-operating with the auditors until Friday, AIB said today.
It was not until the entire portfolio of Mr Runsak’s was investigated and counterparties to the options contracts were checked that the magnitude of his losses became apparent, AIB added.
AIB’s chief executive Mr Michael Buckley was not informed of the loss until Monday night when the material loss became apparent. He was telephoned by Ms Susan Keating, the chief executive of Allfirst, who had only heard about it during the preceding hour.
When asked to describe his reaction to the news Mr Buckley said "my heart sunk."
Mr Runsak disappeared over the weekend as the net closed in although his wife has been questioned by the FBI.