RTE has discovered that for a number of years AIB has been overcharging foreign exchange customers. Financial Authorities today confirmed that AIB customers have been overcharged by at least €14m since 1996.
After receiving certain information that AIB had been systematically overcharging certain customers in relation to its foreign exchange transactions yesterday afternoon, RTE News put a series of questions to the Bank.
RTE understands that the software system within the bank used for charging customs on foreign exchange transactions was know as 'Castlemain'. There had been a problem with this system for nearly ten years.
In a statement today, the Irish Financial Service Regulatory Authority said it is investigating AIB's foreign exchange charges.
IFSRA said it had received an anonymous telephone call two weeks ago, making certain allegations relating to foreign exchange charges within the bank.
IFSRA said it raised the issue at a meeting with AIB last week and sought a full report from the bank on the matter. It added that it was continuing to actively pursue the matter with AIB at a senior level.
The Authority has asked AIB to immediately report on the extent of the impact on its customers, to examine how compensation can be appropriately paid, to identify how the matters could have arisen and persisted over an extended period of time and to identify remedial measures to ensure that such matters could not arise again.
'Our initial investigations are concentrating on amounts charged by AIB on its foreign exchange customers that were over and above the relevant charge notified to the Office of the Director of Consumer Affairs in 1996', the IFSRA said.
In a statement from AIB this evening, the bank confirmed that it had overcharged some customers to the tune of €14m.
The bank said the nature of the transactions meant it would not be possible to identify all the cases and it was in discussions with the financial authorities about how to make reparation. The bank apologised that the issue went unaddressed for such a long period.
AIB said it had informed the Office of the Director of Consumer Affairs in 1996 of a wide range of foreign exchange charges and margins. In that notification, there was an error in relation to one of the margins listed.
AIB said that the notification stated that the margin for non-cash transactions over £500 was 0.5%, when, in fact, the margin being levied was 1%.
'This error was not addressed until April 2004 and AIB is now in discussion with IFSRA in order to review and rectify the situation,' the statement said.
'Part of this process involves AIB carrying out an investigation into how this situation occurred and sharing the results of this with IFSRA,' it added.
In 2002, AIB discovered a foreign exchange fraud at its US subsidiary, Allfirst, based in Baltimore, Maryland. Dealings by rogue trader John Rusnak were alleged to have cost the bank $691m. An investigation for AIB by Eugene Ludwig, former Comptroller of the US Currency and former vice-chairman of the Bankers Trust
Company, found the losses dated back to about 1997.
