AIB Under Fire Over Foreign Exchange Blunders

by Philip Morton, Investors Offshore.com

21 May 2002

Having just dusted itself off after the scandal which followed admissions that rogue trader, John Rusnak had lost its US unit, Allfirst Financial Inc. around $750 million, Allied Irish Banks has again found itself in hot water - although this time over slightly more run-of-the-mill foreign exchange transactions.

A three month investigation conducted by the Irish Sunday Independent revealed that AIB was systematically cheating customers attempting to conduct transactions in different currencies, leading the newspaper to alert the Director of Consumer Affairs, Carmel Foley.

According to the Sunday Independent, random checks conducted in different AIB branches throughout Dublin revealed that customers offering dollars for dollar bank drafts were told that the US currency had first be converted into euros, then back into dollars before the purchase of the dollar draft, and that a fee for the two exchanges would be payable. This represents not only a contradiction of the bank's stated policy, but more seriously a breach of the law on equal exchange transactions.

The newspaper's complaint was upheld, and - blaming individual errors on the part of the branches in question - AIB promised to ensure that: 'all staff involved in foreign exchange are aware of the correct charging structures.'

However, a subsequent test revealed that the practise was still taking place at branches in Dublin, and the Sunday Independent again alerted Ms Foley, who called a meeting with senior executives in order to discuss the continuing breach of codes of good practise and banking law.

The newspaper reported at the weekend that faced with the choice between admitting to deliberately fleecing customers or to gross incompetence, the bank plumped for the latter, going into the meeting with 'its hands up'.

Allied Irish Banks says that it has now implemented a 'specific training programme on the correct processing of equal exchange transactions as part of its regular weekly branch training in all its branches'.

However, speaking to the Sunday Independent on May 19, the Consumer Affairs chief condemned the 'systematic pattern' which had emerged, and warned that she will be monitoring the progress of the training programme, which is set to be fully operational by the end of this month.

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