# Some questions on the AIB forex issue



## Brendan Burgess (7 May 2004)

As a shareholder in AIB and as a business customer, I have some questions which I have not heard answered in the RTE reports.

*Was the error intentional?*
It has been described as fraud and as a scandal and as a rip-off. If someone in AIB intentionally input the wrong number to increase profits, then it is fraud, a rip-off and a scandal.

This is what happened in National Irish Bank. People were intentionally charged more than the agreed rate.

*How much have individual customers lost?*
€18m over 8 years is insignificant in terms of AIB's overall business. But increased payments of €1000 could be a lot to any one customer.  

*When was the problem  and the extent of the problem discovered? *
There are errors made all the time. However, this was a systematic error, so when was the extent of it known?

*Was it rectified immediately for ongoing business?*
I can understand that it might be very difficult to sort out a backlog problem. But was the problem rectified immediately for ongoing customers? It appears to have been first noticed at "departmental level" two years ago. But what is most worrying is that they still overcharged customers by €3m last year - after discovering that there was a problem. 


*Was there an attempt to cover up the problem?*
After intentional fraud, this is the most serious allegation. 

*What was the role of the Office of the Director of Consumer Affairs*?
The AIB spokesman on Morning Ireland seemed to suggest that the main problem was that they had notified the ODCA that their maxium rate was .5%, but that they charged customers 1%. This is a problem, but not a huge problem.

*Why did the customers not notice it?*
I must check my forex transactions. Did they quote .5% but calculate it at 1%? Or did they quote 1% and charge 1%?

Brendan


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## Brendan Burgess (7 May 2004)

I have just read the AIB statement in the Irish Times. And it seems to be completely different from what RTE were suggesting.

A customer bought foreign currencies from AIB and was charged 1% commission. This was calculated properly. This was properly disclosed on the transaction documents. The customer was charged as quoted.

The mistake was in what they told the ODCA that they would charge customers. It appears that they charged 1% as intended, but that their notification to the ODCA was wrong. 

I would read this that customers didn't lose out at all?

Brendan


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## rainyday (7 May 2004)

Hi Brendan - Isn't that the 'glass half full' view? You could look at the same facts and concluded that they overcharged customers by 0.5% - the fact that they quoted the accurate 1% charge on the transaction documents doesn't make it OK.

The questions I'd like to ask the CEO are;

- What steps did you take to educate your staff/management on the role of the ODCA when that legislation was introduced?
- At exactly what level was this issue known about two years ago - saying it was at 'departmental level' tells us nothing. That could have the head of the 'cutting the grass at Ballsbridge' dept. Who knew? In what dept?
- Is there a culture of 'shoot the messenger' at AIB, whereby the poor divil who highlights the bad news is seen as the one to blame? What steps are being taken to rectify this culture?


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## Brendan Burgess (7 May 2004)

Hi rainyday

It's a stupid mistake which should have been detected and fixed earlier. But based on the information in today's Irish Times, and pending answers to your questions and my questions - it doesn't appear to be a fraud or a scandal. It may be both, but based on the current information, it is neither.

If I go into a pub and the price of a pint is advertised as €4 and they charge me €5, that is overcharging. If the advertised price is €5, then it's not overcharging. If there is price control, and the maximum they are allowed charge is €4.50 then it is somewhere in between.

Brendan


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## Guest (7 May 2004)

> If there is price control, and the maximum they are allowed charge is €4.50 then it is somewhere in between.

I disagree. I would consider this overcharging too regardless of the fact that the excessive price is advertised clearly.


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## Socrates (7 May 2004)

*How much?*

How much were individual customers overcharged?

In today's Irish Independent on Page 15 it says:

On a €1000 transaction, the difference between the approved charge of €50 and the actual charge of €100 should be repaid to customers.

Surely, 15 of €1000 is €10, so the overcharge is €5 per €1000?


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## zag (7 May 2004)

When I heard about this yesterday my first thoughts were that they had told the CB (or whoever it is) that their charging structure was 0.5%, but that they operated a different regime at the counter.  This appears to be what is emerging.

The customer (if they enquired) was told they were charged 1%, and the bank charged them 1%.  Customer reckons everything is legit.

However, AIB tells CB that their rate is 0.5%.  This presumably is for some statutory reporting reason and not just because the bank likes keeping everyone updated.  If this is the case then AIB should be in trouble with the relevant regulator.

I am very surprised that this didn't show up anywhere along the line during any sort of audit or compliance check.

The way I see it - strategic decision is made in the upper echelons to charge 0.5% on these transactions.  I presume charging structures aren't just decided on willy-nilly, so it has to be reasonably high up.  CB is informed of the rate.  You would imagine that somebody somewhere within the organisation is charged with passing this information down the line so it can be implemented.  It's not as if the branch people just made up the rate - this 1% rate was presumably passed on through training and documentation.  If it was just blindly processed (and accepted) because "that's what the machine says the rate is" then this raises huge questions about how reliable any of the rates and charges are.  Does nobody within AIB (or the other banks) check these things ?

I think AIB have dug a very big hole for themselves and the other banks here and it is going to be very hard for them to get out of this - it took 8 years for a systematic error affecting routine day to day branch transactions to be noticed.  This is not good from their point of view.

z


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## piercewhelan (7 May 2004)

*AIB Forex overcharge.*

Can I ask which are AIB saying is the mistake? 
Is it the fact that they quoted the 0.5% to Central Bank or whoever, or the fact that they charged 1% to the customers? I notice that their website page still quotes 1%.

"Currency Notes and Cheques:

All AIB branches carry most major currencies. If you need notes that we don t have on hand, we can order them for you. At AIB, for both purchases and sales of currency notes, we charge a commission of 1%, minimum EUR1.27 maximum EUR6.35 For purchases of cheques, we charge a commission of 1%, minimum EUR1.27, maximum EUR6.35."


 [broken link removed]

Also, how are they going to repay the overcharge. Does every customer have to root out transaction slips and go into their branch? I must have exchanged a good few thousands over the 8 years but identifying them all would be a hard job, though most of the large ones  would have been wires.

BTW. I just bought a few hundred sterling and saved 1% in the Permanent TSB versus AIB (BoI was way off the mark)

Pierce


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## Brendan Burgess (7 May 2004)

Banks need to get approval from the Office of Director for Consumer Affairs for any changes in bank charges under the Consumer Credit Act.

I understand that AIB decided to charge 1% on forex charges. This was what everyone else was charging. However, they incorrectly input .5% on their application to the ODCS. so they had approval to charge only .5% and not 1%.

if they had put down 1% and got approval of it, there would have been no issue. I presume that they would have got approval as this is what everyone else charged. 

There is no control over interest rates - banks can charge whatever they like. But bizarrely, there is regulation of charges.



Brendan


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## Mithrandir (7 May 2004)

*Missing the Point*

1. How come several hundered bank professionals failed to notice that a group of customers were being charge twice the rate as everyone else for SIX years 1996 to 2002? Is this credible?

2. Why did AIB continue to overcharge for a further TWO years? This is deliberate illegal pricing, knowingly undertaken by Irelands largest bank - what does it tell us?

3. If the whistleblower didn't blow TWO WEEKS ago how long were they prepared to continue 2. above? Is there any evidence that AIB was going to do anything at all BEFORE GETTING CAUGHT?

These are the real hard questions and I just can't figure out how this can be pigeon-holed as a "mistake" when you consider them. So far AIB has failed to deal with these. IFRSA must be DEEPLY concerned by what appears to be an attempted cover up. Forget the money, the apparent cover up is the real issue, because if a cover up took place it destroys confidence in banking - thats the issue.


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## IsleofMan (7 May 2004)

*I'm a four star general. Another brandy please....*

As usual senior management are stating that they only recently found out but that divisional/middle management have known for some time about this. As per usual blame the soldiers. With all the scandals going on in the AIB and the huge salaries/pensions/cars/etc that senior managemenr are paying themselves they should have known about this. Stop blaming the soldiers!!


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## Brendan Burgess (7 May 2004)

*Re: Missing the Point*

Hi Mith

I agree with most of what you say. As I asked in my first post on the subject:



> Was it rectified immediately for ongoing business?
> I can understand that it might be very difficult to sort out a backlog problem. But was the problem rectified immediately for ongoing customers? It appears to have been first noticed at "departmental level" two years ago. But what is most worrying is that they still overcharged customers by €3m last year - after discovering that there was a problem.
> 
> 
> ...



It would be a very difficult mistake to pick up. The mistake was not in what was charged to customers. It was in what they sought approval for. Everyone assumed that they had approval for a 1% charge.

I think that the ODCA and IFSRA have questions to answer as well. Do they not check that the charges actually being charged are in accordance with their schedule?  The ODCA never noticed it either in 8 years. I think IFSRA can be excused as they are only in action for one year and I am not sure if they have any responsibility in this area.

Brendan


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## Guest (7 May 2004)

Don't financial institutions have compliance department whose job it is to ensure that the authorisation/regulation rules are adhered to and that day to day business practices comply with these rules? Not to mention senior management who are tasked with making sure that such departments do their jobs properly and with whom the buck stops if they don't?


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## gg (8 May 2004)

*aib*

Thieft is thieft even if you did not mean to do it.Surely somebody in AIB has to go to jail because of this?? 





gg


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## Brendan Burgess (8 May 2004)

Hi unregistered user

That's a valid point. The compliance department should have picked up this error. 

Now it appears that it took them or someone else 6 years to discover the error. Do we all agree that the compliance department should all be fired? Or maybe the person who made the initial faulty submission to the ODCA should be fired? 

If we agree that, then we are creating a culture of cover-up. If I discovered something which I should have discovered 6 years ago and the media were going to make a mountain of it, then I would be sorely tempted to cover it up.

Brendan


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## rainyday (9 May 2004)

Can we all agree that the departmental manager who know about this two years ago and didn't escalate the matter appropriately should be fired?


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## Brendan Burgess (9 May 2004)

Hi rainyday

I will agree if you will agree to have the Unfair Dismissals Act repealed, so that an employer has the right to fire anyone who makes a mistake. The reality is that it is virtually impossible to fire anyone who has been in employment for more than 12 months. 

If this departmental manager has an excellent service record and has made one, admittedly big, mistake, he should not be fired. He should get a verbal or written warning and his decisions in any similar matters should be reviewed.

Brendan


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## monk (9 May 2004)

When this came to light, this was the scenario that came to me: 
If this is some sort of system error/blip that has been sitting there for the last 2 years, my initution is that when this came to light then, via local dept manager/compliance selk assestment etc. it was probably highlighted, a manual process was put in place to fix the blip & a systems fix requested. Systems fix never came on-line, dept. people moved on, manual process forgot by subsequent staff turnover, while compliance always had it ticked as something that was being addressed. The usual 'it's being looked after by someone else, only they don't know what they're looking after' in large org's. IMO there will be no direct fall guy, I don't think it was intentional(not saying thats an excuse), I'm just curious how they will pay it back.

As an aside, and I'm not sure if this should fall under ODCA or IFSRA, but do you ever notice that IFSRA never really come out with the medium/big news annoucements/end results, it always seems to be politicans(mainly Mary Harney). It's like IFSRA can't move/take a position on anything without political direction or maybe they're on a leash & are only let loose when their masters see something worth a couple of minutes airplay in the furore/findings?


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## gg (9 May 2004)

*aib*

"As an aside, and I'm not sure if this should fall under ODCA or IFSRA,"


It should fall under the fraud squad. They should be brought on board. it would not take aib long to act then.



gg


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## Brendan Burgess (9 May 2004)

HI monk

IFSRA are in a very difficult position here. They realise that it's a storm in a teacup, but they cannot say that or we would accuse them of defending the system. So they must announce an investigation.

The politicians can jump on the bandwagon because we all love attacking the big bad banks. Unfortunately, there are much bigger consumer issues which the politicians are ignoring.

Brendan


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## Penny (9 May 2004)

*Above*

While its not a critical event, and the sum isn't massive, its too early to come to your conclusion Brendan. Reading the newspapers today, the most telling point was the fact that the staff union IBOA is calling for an outside investigation, and Frank Connolly who is usually very informed is quoting inside sources who don't believe the figure.

IFRSA clearly don't the "mistake" as the key issue, instead they see the attempted cover up as far more serious. I agree. Its also telling that both Harney and Charlie Mc C are attacking AIB!

There may be more to this yet. The Sunday Trib ran on the bad selling to older customers, and the Sindo ran on illegal pricing for dollar to euro to dollar. I don't think you should be so dismissive and its about time one of the big 
banks got a bloody nose.


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## Guest (10 May 2004)

False declarations to the regulator and/or illegally applying different charges to those authorised by the regulator as well as the possibility of a cover up once the "error" was identified are surely VERY SERIOUS matters regardless of the sums involved!


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## monk (10 May 2004)

*Re: Above*

Apparently the regulator doesn't have the legal power to do anything about this..  Whats the point of IFSRA if they can't sort something that should be a straight forward example of breach of consumer rights(which IFSRA look after, right?) AIB should be fined, be made bring in & pay for independent forensic accountants to investigate & repay each individual person who suffered a loss. 

Instead we'll have Mary Harney coming out and saying that if we feel the service provided is below standard we should show it with our feet and walk away from shoddy practices - but they don't penanilise the perpetrator. To me I believe the government has seen the effectiveness of Britian's Labour spin doctors & adopted the approach here without any substance to back it up. They believe window dressing can give them the gloss of doing something without having to really doing anything. As an individual all of us are being conned, only if you are part of a larger lobby group that they care about will you be heard. 

I was at a do a couple of weeks ago & ended up talking up with a IFSRA employee(BB your name came up re BCP, & I suggested he to have a look at this site for opinions re IFSRA's performance) but while he was optimistic about what they could do they don't have the legislative power, appartently the half the legislation doesn't empower the Consumer Director to do anything because she isn't named in the enactments.
I think in Ireland today you have to look after yourself because nobody else(incl the govt) will.. Gloomy to me even as someone in my 20's but we are letting greed/degree of success dominate nowadays which can only be a downward spiral. I know we are only copying others (US, UK etc) but as a model it has to end in destruction..


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## Guest (10 May 2004)

I personally have no problem with the free market idea that the customer has to take responsibility for looking after himself to a large extent but I do have problems with (a) alleged breaches of the regulatory rules, alleged illegal (over)charging of customers, and suspected covering up of the issues once the come to light internally (b) the seeming inability of the regulator to deal decisively, or better still proactively, with clear cut cases of misleading/false advertising (  ) and (c) the seeming inability of the regulator to deal proactively or decisively with arguably less clear cut cases of alleged dodgy advertising (e.g. the (geared)tracker bonds advertising fiasco - although perhaps IFSRA are dealing with this behind the scenes and we can expect some action soon?). Where regulation is in place then it should be done properly. As long as institutions comply with the rules then there is no harm putting some onus on people to shop around and look out for themselves.


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## Guest (10 May 2004)

*Re: Above*

Now, THIS certainly seems a bit OTT to me...

www.rte.ie/news/2004/0510/aib.html


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## WizardDr (14 May 2004)

Folks

Apparently:

- what AIB actually charged was the same as some of the others;
- the rate they quoted to DoCA was wrong;
- the charge was on the receipts i.e. you got charged what they said they were charging.

Would it not be a good idea to give the dosh to Charity and save all the effort 'tracing' from unlinked FX machines to customers?

And when will Regulator simply start doing some 'transaction' sampling instead of rushing in as if it were an aiir disaster?

A bigger crock is the 'clearing' ,, saying it now.. watch the Regulator take 50 years to cop it..


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## Brendan Burgess (14 May 2004)

*Re: Above*

Hi Wizard

I have business accounts in AIB and Bank of Ireland. I buy around £5,000 worth of sterling a year. I would sometimes check the prices and AIB were always cheaper, so I bought my drafts from them,

I bought sterling yesterday and the receipt says



> Sell draft    2273.5 sterling
> rate = .6685
> Eur   3400.90
> comm.  4.44



This is what the "AIB Schedule of international transaction charges "says:



> Draft issuance       €4.44 per draft



There is no mention of 1/2% or 1%. It is and always was buildt into the exchange rate quoted. If I am happy with the .6685 rate, it doesn't really matter how it was calculated as long as it is cheaper than Bank of Ireland. 

The only misleading thing is the word "comm." which should read "draft issuance". 

It goes to show the nonsense of requiring bank charges to be approved by the ODCA. The 1/2% or 1% is regulated, but the actual rate charged is not. So AIB could have charged 1/2% and charged a different exchange rate. 

Brendan


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## XXXAnother PersonXXX (18 May 2004)

*.*

An interesting thing that's just occured to me. EBS has stopped accepting foreign cheques. Guess who they use to do the transaction?

Apparently AIB have started charging EBS too much for foreign cheque clearing. Hmmmm. It seems that the AIB's tallons can still mar my life even when I think I've stopped being a customer.


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## rainyday (18 May 2004)

*Re: Above*



> EBS has stopped accepting foreign cheques.


I lodged a USD cheque with them on 26th April.


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## XXXAnother PersonXXX (19 May 2004)

*.*

From the 16th of May you won't be able to (at least in the Square, Tallaght)


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## garrettod (25 May 2004)

*Re: Above*

Hi

Great posts with some excellent info.

Simply put, if your not happy with your bank ... then move to another one guys'n'gals .... it's called freedom of choice coupled with competition


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## Spacer (2 Jun 2004)

*..*

For clarification, the ODCA only became responsible for regulation of bank charges in May 1996.  

Prior to that, the banks operated something akin to a "gentleman's agreement" with the Central Bank.  The banks would ask the CB for approve specific increases in charges and the CB would nod demurely and say "oh go on then!".  It was a bit like a child asking the teacher if the could go to the bathroom. 

When ODCA assumed responsibity for regulation of bank charges, they were given a schedule of all charges that were approved AT THAT TIME.  Had they been advised that the rate was 1% and not 0.5%, there wouldn't have been a problem.  They compounded the difficulty in 1998 when they explicity assured the ODCA that the charges notified in 1996 were not being exceeded.  

Their "sin" therefore is that they did not seek to address the problem when it became known.  It was at this point that the dishonesty began.  They clearly felt that if thousands of customers either hadn't noticed or couldn't be bothered to complain, it wasn't a serious issue.  

Whoever made the decion to carry on without advising the regulator is the one at fault and he/she deserves to be fired for an act of gross misconduct (which I assume is provide for in the grirevance procedure of a company as large as AIB).  

Those with responsibility for overseeing the work of this individual should also consider their position.  

It might interest people to know that at the time it was responsible for the regulation of bank charges, the ODCA had a staff complement of just four people to regulate the charges of all the banks (retail and otherwise) in all of the country.  

While I'm not sure what resources are currently available to IFSRA, I suspect they're better equipped (from both a resource and legislative perspective) to ensure an effective regulation.  However, their inability to impose sanctions (as originally sought but successfully put to touch by the IBF) clearly compromises their ability to do so.


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