£15million NatWest fraud: Lapses let gang commit crime

Nov 2 2007

A “FLAW in the system” created when the Royal Bank of Scotland took over NatWest allowed a gang of corrupt businessmen to steal more than £15m from a bank in St Helens, a court heard yesterday.

The “lapses” by NatWest staff members also meant safeguards put in place to stop fraud had failed.

The loophole meant that cheques appeared to customers as if they had been paid in, when in reality they may still bounce, Southwark Crown Court heard.

The fraudsters are said to have exploited this by paying in bogus cheques for millions of pounds and drawing on them before the NatWest bank in St Helens had the chance to return them.

They maximised the potential of their scam by planning it for a May bank holiday weekend when they would have an extra day to launder the money, the jury was told.

Companies involved are said to have included Bootle-based Britanniacity, which banked at the branch and was managed by two of the defendants.

Prosecutor David Aaronberg said the company, which traded mainly in high value mobile phones, was an “obvious” account to use because it had been receiving transfers for years of vast sums of money stretching into millions.

“The fraudsters in our case came to realise that with careful planning the scope existed to defraud the bank on a grand scale,” said Mr Aaronberg.

“If they could obtain some worthless cheques, that were ostensibly valid in some dissolved company account for example, and if they paid those cheques into Britanniacity, then it was certain those cheques would show up on the third day and then they could transfer the value of those cheques away.

“They also realised this. That if they did it over a bank holiday weekend, they would have even more time to fleece the bank.

“If a cheque was paid in on a Wednesday before the bank holiday, it would be cleared on a Friday and the money could be paid away and there was every chance the cheque would not bounce until Tuesday at the earliest.

“By that time the money could be moved well away.’

Mr Aaronbsaid the fraudsters had been tipped off about the opportunity for dishonesty by a letter from RBS that had been sent to all customers following its takeover of NatWest in 2002.

It read: “Please note that funds will be showed as cleared on the third working day. Cheques can still be returned unpaid after this date and you should continue to allow at least four working days for cheques paid in to be returned unpaid.”

Mr Aaronberg told jurors: ‘If you were an honest customer and you received this letter, it would alert you to be careful and make sure funds had actually cleared before you paid money away.

‘The second effect of this letter is to alert dishonest customers that there was what it is being flagged up in this letter as a flaw in the system.

‘This letter is as good as saying to somebody dishonest, funds are going to show up on the screen even though they may not be there, and you may be able to pay away funds even though the funds haven’t cleared.’

The money that was allegedly taken from the St Helens branch was transferred to accounts held in Latvia and Dubai, the court has been told.

The gang are said to have attempted to steal more than £20million and succeeded in getting just £5million less.

They are accused of stealing £15.25m from the bank in just five days, between April 30 and May 4, 2004.

A 45-year-old man from Cheshire, a 35-year-old from Paisley, a 33-year-old from Liverpool and a 27-year-old from Bootle, are on trial.

None of the men can be named for legal reasons.

A further ten men accused of involvement in the fraud are due to stand trial in the New Year.