The Serious Fraud Office (SFO) said on Thursday it was investigating an alleged £56 million ($82 million) fraud on the corporate banking department of Allied Irish Banks.
The SFO said Allied Irish Banks (AIB), Ireland’s biggest bank by market value, had provided loans to companies controlled by an unnamed individual who was the main suspect in the probe. The loans were used for the purchase of investment properties in the UK by these companies between 2003 and 2007.
The SFO said under the alleged fraud, the borrower companies created “overriding” leases which involved a blue chip property company. “The suspect created a bogus situation, where the blue chip property company’s name was used fraudulently, in order to attract investment loans from the banks,” SFO spokesman Davie Jones said, adding no arrests have been made.
These leases were generally for longer periods and at higher rents than existing tenants’ leases, increasing the value of the properties and leaving the property company with a direct obligation over the lease payments, the SFO said. “The property company, when it discovered this, brought the matter to AIB,” Jones said. He declined to name the property company.
The SFO said AIB uncovered the fraud in an internal review in 2008, and referred the matter to the authorities. It also took control of and sold the relevant properties.
“The sale resulted in a write down of the outstanding loan balances by £56 million,” SFO said in its statement, adding AIB was considering legal action against a number of parties in respect of its deficit.
AIB said it could not comment further as it was an ongoing investigation. The SFO in a joint investigation with police, said the main suspect had operated with the assistance of others adding that searches had been carried out on Wednesday at a business and two residential locations in central London.
“We have information that suggests there could be other financial institutions who have been subject to a similar fraud ... possibly the publicity about this case will make them look if they’ve been victims also,” Jones said. (Reuters)