Fraudbusters target Royal Bank bosses

Published on Sunday 11 June 2006 00:15

A SQUAD of fraudbusters is monitoring senior managers at the Royal Bank of Scotland (RBS) after an employee perpetrated the biggest fraud in Scottish legal history.

The 15-strong team has been appointed to work full-time to prevent any repeat of the Donald MacKenzie case, where 21m disappeared in a maze of fake loan accounts.

MacKenzie, 45, from Edinburgh, is facing a lengthy jail term after setting up the fake accounts and then shifting money between them to cover up his tracks.

Around 10m is still missing and some of that may never be recovered.

The fraud was discovered by chance as a result of a major IT upgrade. RBS insiders admit the firm - the UK's second-biggest bank - has been severely embarrassed by the case and is determined to stop it happening again.

A team has long existed to detect and prevent fraud among RBS's 80,000 UK employees. The new squad will concentrate on monitoring senior managers - the people who can potentially do the greatest damage.

The new team of investigators will be based at various locations, including RBS's new Edinburgh headquarters at Gogarburn. As well as monitoring transactions involving senior employees they will devise better systems for spotting fraud in the first place.

An RBS insider explained: "There has been a pretty vigorous response to all this and what came out of it is we've started up a new operation - a new section to deal with possible fraud at the senior level. There are 15 people in it. We have always had people to investigate and check up on security within the bank, but this situation showed that we needed to do more and have a new focus on senior staff."

The new security section will be tasked with examining transactions and loans authorised by senior managers and devising new ways, such as computer software, which can flag up suspicious deals.

The insider admitted that the MacKenzie debacle had led to a major investigation of the bank's loans as anxious auditors scoured the books to see if other managers or senior staff had concocted similar scams. So far, he said, the search had drawn a blank.

Martin Dougall, an expert in forensic accounting with PricewaterhouseCooper, said the rise of IT in banking meant there was greater scope for mangers and staff to commit fraud. He would not comment on the RBS case, but said: "Information security in banking is becoming more and more important as much of banking is done electronically.

"With the exception of financial call-centre employees, the typical profile of a fraudster within a bank is someone in middle or senior management with access to vast amounts of information and the authorisation to enter major transactions."

An RBS spokesman said it was company policy not to comment on security matters.

Meanwhile, MacKenzie has so far refused to tell detectives what triggered his crimes, which took place from 2000 up to April 2004, when he was arrested. He told officers that pressure from the bank to get as much new business as possible pushed him towards the crimes, but he has never explained the first act of fraud.

Police believe the trigger may be something as minor as incomplete paperwork on a loan application.

Detective Inspector Alan Dickie, of Lothian and Borders Police, said: "It could even have been that he had agreed a loan with a legitimate client but that some paperwork hadn't been completed and when he tried to finish the application on another date it didn't go through properly, but he was stuck having agreed the loan. He then had to manufacture a fake loan to cover the loan he had agreed. And, later on, he then needed to create another false loan to cover that loan, and so on and so forth.

"The point about being under pressure is hard to believe. Many of his colleagues are under similar pressure."

Part of what has added to the mystery over the case is the fact that MacKenzie seemed such an unlikely criminal.

Dickie added: "He almost seemed relieved when the police arrived - that it was finally all over. All my time involved in this case he never struck me as having a criminal mind. He actually came across as a regular nice guy. He was reasonably helpful with most of our inquiries but has never told us what started it all."

Pillar of the community whose honest facade hid a dark secret

HE APPEARED scrupulously, almost painfully, honest even when it came to selling his home. As the eventual buyer admired the stylish fitted kitchen and spacious extension to Donald MacKenzie's Edinburgh property, he freely admitted it had all been done by the previous owner, not him.

At work, at the rugby club, and with his small circle of friends and acquaintances, the 45-year-old banker seemed to make a point of being more open and honest than most people would think necessary.

The explanation was there in his solid, middle-class background, in his pillar-of-the-community parents, his industrious, sporty childhood in the pretty, seaside community of Cellardyke in Fife. His father had set up the local community council and was nicknamed "The Provost" because of his role in the village.

MacKenzie worked his way up in the Royal Bank of Scotland to a position of enviable professional status.

He enjoyed expensive lunches with high-powered contacts but outside work his life was modest and low-key, dominated by weekend pilgrimages to his beloved home community and, above all, Waid Academy former pupils' rugby club.

So it could hardly have been more shocking when MacKenzie's friends, family and colleagues discovered he had masterminded Scotland's largest-ever fraud. Key among the many remaining questions is how this model citizen came to perpetrate a 21m fraud, why he did it, and where is the missing 10m?

MacKenzie was born on January 25, 1961 at Craigtoun Maternity Hospital, St Andrews, into one of Cellardyke's most respected families. His father George, was a sales representative and a former RAF officer, his mother Christina was a book-keeper.He had one sister, Morag. The family were at the centre of everything civic, from the local Kirk to the community council.

Dan Paterson, his former maths teachers at Waid Academy, described MacKenzie as "honest as the day is long".

And Tom Watson, MacKenzie's former head teacher, added: "I thought at the time he did the right thing by going straight to the bank and not going to university. He was clever enough, but I thought he did the right thing. I would certainly have trusted him with my money."

MacKenzie began work with the Royal Bank's local branch in Anstruther, worked for the firm in Dundee and East Wemyss before transferring to the operation at the West End of Prince's Street in the early 1990s.

He maintained his connection with his home town, often returning for weekends to visit his family and play for the rugby team as a stand-off, and help organise the club. He spent 11 years as treasurer.

He married in March 1998, aged 37, to Margaret Colthart, a 29-year old divorcee who also worked for RBS.

After joining the RBS's Princes Street branch, MacKenzie began to confide in friends that the strain was building up, despite winning a string of awards for his performance. A close friend, who has known him since childhood, said: "He used to complain about the pressure he was coming under. He said that he continually had to get more and more businesses and it was difficult."

MacKenzie's only known, regular indulgence was to take long, expensive business lunches at top restaurants, including Edinburgh's Number One at the Balmoral Hotel and Restaurant Martin Wishart in Leith.

But others were beginning to notice worrying signs. A source connected to the rugby club said: "We had eight years of Donald keeping the books immaculately and then three years of complete chaos beginning around late 2000, maybe early 2001. You would get a phone call saying he couldn't be at a meeting, that he would bring the financial report and the accounts round later. Then the accounts would be in a mess but he would promise to sort them out. I did ask others whether they should get someone else to do the accounts, but the response was, 'Oh, it's Donald'."

MacKenzie put 25,000 of the stolen cash into the rugby club to keep it afloat. The accounts were in such a mess that the club was ineligible for various grants and MacKenzie appears to have been making up for a mess of his creation.

Suspicions remain that MacKenzie was linked to organised crime in some way, but officers believe he may have made a serious mistake over a single loan around 1999 and the rest flowed from his attempts to cover that up.

Detective Inspector Alan Dickie of Lothian and Borders Police said: "It's likely he will have had contact with dodgy people, but possibly not any more than any other bank manager. Former offenders and all kinds of people still need bank accounts. So I think we would remain to be convinced about that."

But there are indications of something more sinister. The woman who bought MacKenzie's former home in Broomhall Place, Corstorphine, Edinburgh, in 2003 was struck at the time by his honesty, but has wondered since about what he was up to.

The woman, who asked not to be named, said a mysterious stranger turned up on the doorstep a few months after the move looking for MacKenzie. "He was very insistent," she said. "When I said they no longer live here, he said, 'Are you sure?'

"One odd thing was they [the MacKenzies] didn't leave a forwarding address for mail after moving. I thought that was strange."