LONDON (Reuters) - A review of Lloyds Banking Group’s handling of one of Britain’s worst banking frauds is unlikely to be completed until late 2019 due to the volume of documents involved, a source with knowledge of the inquiry said.
The investigation by a former high court judge was launched last year to assess whether Lloyds properly investigated and reported the fraud at HBOS, which it bought in January 2009.
The review by Linda Dobbs is one of the last high-profile probes into the conduct of Britain’s biggest banks after the 2008 financial crisis, and is eagerly awaited by victims of a fraud which has seen six people jailed for a combined 47 years.
HBOS was once Britain’s biggest mortgage lender, and was rescued in a state-engineered takeover by Lloyds, which has apologised to victims of the fraud and set up a 100 million pound compensation scheme.
“The Group is determined to get to the bottom of what went on, and a thorough investigation is being conducted,” Lloyds said in an emailed statement on Thursday.
Those jailed last February were former HBOS bankers Lynden Scourfield and Mark Dobson, consultant David Mills and his wife Alison, and their associates Michael Bancroft and Tony Cartwright.
The fraud involved Scourfield referring struggling businesses which were HBOS clients to Mills’ consultancy, in return for bribes which the judge at their trial said included designer watches, sex with prostitutes and foreign holidays.
Dobbs and lawyer Peter Carter have hired 5 more lawyers to handle the paperwork disclosed by Lloyds, which has risen from an initial estimate of 50,000 documents to around 500,000, the source told Reuters.
The pair had been hoping to finish the review by the end of this year.
The work involves sifting through the documents to build a picture of what Lloyds’ senior executives knew about the fraud, what they did about it and when.
Lawmakers have in recent weeks increased scrutiny of Lloyds’ conduct in the years following the crisis, after the leak of an internal report, adding to gathering political concerns over the treatment of small and vulnerable business customers by banks including HBOS.
The Turnbull report, which was cited in Parliament by lawmakers, alleges that senior HBOS bankers tried to cover up the fraud and has prompted questions over who within Lloyds had seen it, given the bank said it knew nothing of the fraud until the criminal case last year.
The source familiar with the Dobbs review said the Turnbull report was one of the hundreds of thousands of documents received, and that efforts were now being made to establish in what context it was written, who was made aware of it and what was done about it.
The Financial Conduct Authority said in April last year it is conducting its own review into the discovery and reporting of the HBOS fraud, focused on the period before its acquisition by Lloyds, whereas the Dobbs review centres on the time afterwards.
Britain’s National Crime Agency has also widened a review into the fraud at HBOS to look into allegations that fell outside of the initial criminal investigation.
Editing by Alexander Smith