Fraud at Allfirst Financial: the failure of corporate governance?

Theresa Dunne, Christine Helliar, David Power

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Delves into the alleged fraudulent dealings of a trader at the Allied Irish Bank's (AIB) US subsidiary Allfirst Financial, profiles the regulatory environments of the US and Ireland, and the scale of AIB and Allfirst's operations, and explains how the dealer incurred losses of $691M, from 1997 to 2002, by creating bogus matching currency trading options. Reviews the findings of AIB's investigation, details Allfirst's internal control mechanisms, highlights that the same senior manager, responsible for ensuring profitable trading, was also responsible for trading controls, but pinpoints failure of the back-office to confirm trades as the most significant lapse, observing that this deficiency was exacerbated by missing software, a lack of written procedures, and failure of internal audit and risk management mechanisms. Concludes with lessons learnt from, and the implications of, the case, refers to dismissals and resignations, sale of Allfirst to another bank, and recent US legislation regarding corporate governance.
    Original languageEnglish
    Pages (from-to)159-167
    Number of pages9
    JournalEuropean Business Journal
    Volume15
    Issue number4
    Publication statusPublished - 2003

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