Ethics Newsline®

BALTIMORE
Allied Irish Bank (AIB) last week announced that it was investigating how internal safeguards failed to catch $750 million in fraudulent trades by a rogue employee based in the United States.

John Rusnak, a U.S. currency trader with AIB subsidiary Allfirst, is suspected of hiding $750 million in trading losses by using an elaborate system of forged transactions, according to the Associated Press.

Although Rusnak has not yet been charged with any crime, he has been under investigation for weeks, the AP reported.

Last week, AIB announced a formal investigation into Rusnak’s activities, suspending him and four of his superiors while the company scrutinizes their actions.

Admitting the company’s efforts to monitor fraud had failed, AIB’s board said it was still too early to determine fault and apportion blame.

“There is no doubt that John Rusnak was involved in fraudulent activity,” AIB chief executive Michael Buckley told the AP. “Whether or not he benefited from that is still the question.”

The AIB scandal comes after extensive — but perhaps insufficient — industry efforts to control rogue trading, noted the AP report. Those efforts gained significant momentum following the collapse of Barings Bank in England, which was hollowed out by more than $1 billion in hidden losses incurred by rogue trader Nick Leeson.