Memo warned of rogue trader

Colleagues of rogue trader John Rusnak warned in a memo written more than two years ago that he was gambling too much of his bank's money, it emerged today.

It said that Mr Rusnak, who is alleged to have lost Allied Irish Banks' American subsidiary Allfirst more than £500 million, was routinely overstepping his credit limit.

The existence of the memo, which was disclosed today by the Wall Street Journal, came despite the claim last week by Allied Irish Bank chief executive Michael Buckley that the firm had no knowledge or Mr Rusnak's losses until this year.

The FBI and American banking regulators are investigating the allegation by AIB that Mr Rusnak committed fraud as he lost £485 million in unauthorised foreign exchange deals.

The regulators are also looking at the controls put in place by the bank to prevent unauthorised trading and whether they were adequate.

Mr Rusnak's lawyers deny the 37-year-old father-of-two stole from the bank and say he is co-operating with the inquiry.

Today the Wall Street Journal said the memo, written in mid-1999, warned that Mr Rusnak was exceeding the limits on his deals which put £1.4 million to £2.1 million of the bank's money at risk each day.

Lapses had occurred roughly once every three months and prompted the bank to redesign the computer system used to monitor the risks taken by Mr Rusnak's foreign currency trading department to make it "faster and easier".

The improved program was also installed on Mr Rusnak's computer to "hopefully avoid future over-limit situations", according to the memo.

The memo specifically warned Mr Rusnak it was his duty to know how much of the bank's money was at risk at the end of trading each day.

Mr Rusnak has been accused of a "devious, complex and determined" fraud in which he hid his losses from the bank for five years.

The claims came last week from Mr Buckley, two weeks after the initial allegation the losses had been over one year.

The losses halved AIB's annual profits to £296 million, which prompted an approach from the Royal Bank of Scotland for merger talks.

The bank alleges Mr Rusnak set up phoney deals to conceal his losses, which are believed to have been caused by him betting the yen would rise in value against the dollar, when it actually fell.

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