Lloyds TSB's anti-fraud systems are facing scrutiny, after the bank was charged with assisting a business owner to launder several hundred million dollars.
Prosecutors acting for the Southern District of New York have alleged that over 200 financial transactions carried out between 2000 and 2004 by Lycourgos Kyprianou, then-chief executive of bankrupt software vendor AremisSoft, passed through his accounts at Lloyds TSB because the firm "disregarded " its legal obligations to stop the activity.
The effectiveness of Lloyds TSB's anti-money laundering systems faces being picked apart by prosecutors, despite the bank's significant investments in AML systems and software in a bid to keep a lid on fraud.
Ron Whatford, the former director of group operations at Lloyds TSB, has said in the past that anti-money laundering is a "top priority" for the bank, both in terms of IT and processes, to give it "a broad range of fraud and opportunity detection functions."
In 2002, during the period that prosecutors allege money-laundering was taking place, the bank installed an AML system from Searchspace to scan transactions and identify patterns for unusual activity. The system ran on IBM eServers, alongside another anti-risk tool from Fortent.
Also in 2002, Lloyds TSB supported an anti-money laundering initiative promoted by the UK regulator FSA (Financial Services Authority), and other five major UK banks. Under the initiative, the banks vowed to reconfirm the identity of their customers to help prevent money laundering.
The FSA has a light touch policy about money-laundering, putting the onus on the banks to develop adequate systems to detect and investigate suspicious activity.
In a statement in response to the new charges, Lloyds TSB said: "We do not believe there is any basis for this action so we are disappointed that the US government has commenced proceedings in this case. We intend to defend the action vigorously and are confident the bank's stance will be vindicated."
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