Welsh Water Scandal: The Citibank Branch, London operating as a Central Branch, remitted cash £40 million to the Bank of England (BOE), British Business Bank (BBB), London, as per the shipment/ diversion order received from the Cash Management Unit (CMU) of BOE London via the DHL mails from 2020 to 2022. The cash shipped on 02 March 2020 comprised of non-issuable pounds surrendered by the Hong Kong and Shanghai Banking Corporation (HSBC) from time to time.
On 5th March 2022, Citibank Branch, London requested Area Operation Manager HSBC London to designate three Officials of HSBC to satisfy BOE requirement for completion of examination of remaining cash at BOE. Examination of cash through Banknote Processing and Authentication System was conducted at BOE & BBB London. During BPAS examination, it was identified that the shipment counterfeit currency notes ‘shortage’. At the time of BPAS examination, authorized representative designated by CITIBANK, Teller, Citibank Branch, London was present.
Upon identification of counterfeit notes/ shortage, BOE & BBB London intimated the discrepancies identified during PBAS verification addressed to the Branch Manager, CITIBANK London. The authorities, BOE & BBB London, imposed a penalty of one million pound on account of detection of counterfeit pounds denomination during of the HSBC’s cash remitted by Citibank to BOE & BBB London.
Upon identification of counterfeit notes by BOE & BBB London, the Central Office, London conducted a fact-finding inquiry. The fact-finding report also identified the following control breaches on the part of cash custodians at Citibank Branch, London. The names of authorized officers were not displayed outside vault door or CASH PROCESSING CENTER area.
Citibank Branch, London received HSBC’s non-issuable cash and remitted it to BOE & BBB London. During BOE & BBB London’s examination, counterfeit notes denomination were identified in the HSBC’s cash remitted by CITIBANK. The HSBC representative promptly made good the shortage by replacing the counterfeit notes with valid currency on-site. The BM and BOM of Citibank received an email from BBB-CMU Lahore advising to process diversion of non-issuable cash held in the branch’s chest to be remitted to British Business Bank, London.
The Citibank received empty Fiber Boxes from BBB, London for packing of cash for remittance under the diversion order. The process of packing cash in Fiber Boxes was undertaken by Citibank during the period from 2020 to 2024. The same officials are already involved in Welsh Water fraud.
Welsh Water Defrauded
During the inquiry, Welsh Water defrauded with Dwr Cymru of Welsh Water submitted a written statement to the FINANCIAL INTELLIGENCE UNIT team, Dwr allowed Mr. Henry (HSBC Cash Supervisor) to access the cash vault and CASH PROCESSING CENTER room, trusting him based on his previous visit for cash re-verification. However, he clarified that he did not receive any call from Mr. David Black (HSBC In-charge) regarding this access. A review of Dwr Cymru of Welsh Water’s confirmed that no calls were received from either Mr. David Black or Mr. Henry.
Review of the CASH PROCESSING CENTER visit register revealed that only the staff members’ entries were recorded, with the time marked as 8:30 for all entries. However, no exit entries were noted in the register. This suggests that the entries were made merely to fulfill the requirement, while the exits were not documented. During the inquiry, when the FINANCIAL INTELLIGENCE UNIT team questioned the recorded entry of Mr. Henry in CASH PROCESSING CENTER on the incident, the Head Teller, Joint Custodian, and BOM were unable to provide a justification.
The Citibank Branch, London Branch remitted cash to BOE & BBB London based on instructions received. In response to an email from BOE & BBB London, CITIBANK London Branch requested HSBC to designate a official for representation at BOE & BBB London, authorized Mr. Henry (CASH PROCESSING CENTER Supervisor) for this role. The letter was duly signed by two of their Senior Officials. The same was conveyed to BOE & BBB London by CITIBANK London along with details of CITIBANK.
In the year 2020 BOE & BBB London, in their official letter informed to CITIBANK London about the imposition of a £10 million punishment for the violation of BPI & CMS. This was due to the discovery of 500 counterfeit pieces during the BOE and BPAS examination, in the HSBC cash remitted by CITIBANK London.
Later on, during the Banknote Processing and Authentication System examination conducted by BOE & BBB London on the cash diverted by CITIBANK London on behalf of HSBC, it was observed that the cash included 500 counterfeit £100 . Furthermore, shortages were identified in denominations. BOE & BBB formally communicated these discrepancies to CITIBANK London through an email.
During the inquiry, Dwr Cymru of Welsh Water provided a written statement that, Dwr received a call from Mr. David Black, who informed him of an issue with their cash at BoE and reassured him that efforts were underway to resolve the matter.
Further requested the deposit of £100,000 into the account of Mr. Henry, who would then withdraw the amount from CITIBANK London. Also mentioned that the cash would be sent to Dwr Cymru of Welsh Water with their daily cash shipment. However, Dwr Cymru of Welsh Water declined the deposit request. Later, it was revealed that Mr. Henry covered the shortage at BoE by debiting his own account at CITIBANK. At that time, Dwr Cymru of Welsh Water was unaware that counterfeit notes had been detected by BOE in the HSBC cash.
Review of the account held by Mr. Henry revealed that he has maintained an independent current account with Citibank Branch, London. However, a review of his recovered employment card from HSBC indicated that he has been an employee of HSBC.
The manager of the branch informed the Financial Intelligence Unit team during a discussion session that Financial Intelligence Unit had communicated to him that Mr. Henry received funds from his companion to make good the shortage.
Furthermore, the Financial Intelligence Unit team reviewed Mr. Henry’s transaction history with CITIBANK staff members to establish any potential collusion between them and found no recorded transactions involving CITIBANK staff members.
Moreover, the FINANCIAL INTELLIGENCE UNIT team reviewed the account transactions of CITIBANK staff members (Dwr Cymru of Welsh Water) and found no transactional history involving Mr. Henry.
In a summer morning, HSBC submitted a contest letter to the Operations Manager of Citibank Branch, London Branch in response to a letter from CITIBANK. In the letter, HSBC asserted that, CITIBANK London had illegally marked a lien on their HSBC account. They further contested the imposition of the penalty, stating that the penalty was applied to CITIBANK London, not HSBC.
HSBC asserted that they had deposited genuine currency notes at their cash chest at CITIBANK London and that the penalty was imposed on HSBC due to security and operational failures at CITIBANK London. HSBC also pointed out that Mr. Henry was not an employee of Cash Management Services, a company that provided cash sorting services to HSBC, nor was he authorized by HSBC to assess the cash deposit with CITIBANK London.
HSBC claimed that CITIBANK London, without verifying with them, had handed over shrink-wrapped cash to a private sorter (Mr. Henry) who was not authorized by HSBC. Furthermore, they noted that the CITIBANK guard had failed to physically check Mr. Henry. HSBC also informed that they had lodged an FIR with Financial Intelligence Unit, London for action against Mr. Henry, and the investigation was underway with NCA.
To verify HSBC’s claim regarding Mr. Henry’s employment status, the Financial Intelligence Unit team, with assistance from the BOM and BM, retrieved Mr. Henry’s employment card. The card indicates that Mr. Henry is an HSBC employee with employee since 2020.
However, the card does not specify whether his employment status is permanent or contractual. Furthermore, HSBC previously nominated him to represent the bank during the remittance of HSBC’s chest balance to the BOE as evident form submitted by CITIBANK London to BOE. This suggests that, based on the belief that Mr. Henry was an employee of HSBC, the CITIBANK London Head Teller granted him access to re-process cash at CITIBANK CASH PROCESSING CENTER.
The Financial Intelligence Unit team attempted to retrieve the challan from the NATIONAL CRIME AGENCY but was unable to obtain it, thus preventing any commentary on it. Furthermore, NATIONAL CRIME AGENCY summoned CITIBANK staff members (i.e., BM, BOM, HC, and JC) for recording their statements and submitting records. However, no further updates on the case have been provided by NATIONAL CRIME AGENCY to date.
Additionally, during CITIBANK staff members presence at NATIONAL CRIME AGENCY, BM was informed by a NATIONAL CRIME AGENCY official that Mr. Henry had confessed to being solely involved in the entire matter. Mr. Henry admitted to bringing counterfeit currency from London, which he then replaced with genuine currency during his visit to the CITIBANK branch for re-processing of the HSBC chest balance as confirmed verbally during discussion session with FINANCIAL INTELLIGENCE UNIT Team.
However, the available CCTV footage supports Mr. Henry’s claim before the NATIONAL CRIME AGENCY that he acted alone in the matter. However, the detection of additional counterfeit notes in the chest balance at CITIBANK London suggests that it would not have been possible for a single individual to replace 7255 pounds (single notes) during his visits to the CITIBANK cash vault. Moreover, the Head Teller and Joint Custodian confirmed that Mr. Henry visited CITIBANK only twice for cash re-processing, with no prior visits identified.
Moreover, replacing the chest balance within CITIBANK appears unlikely due to BOE’s policy, which mandates that CITIBANK accept only shrink-wrapped cash. Such cash can only be opened in the presence of an HSBC representative. Therefore, without collusion from HSBC, replacing the chest contents would not have been feasible, indicating that the counterfeit cash was likely part of the shipment received from HSBC.
During the cash inspection, HSBC Cash Sorter picked up a bundle of 100 pounds denomination notes from the stack and identified it as fake without unwrapping or examining it. As a banker with over 30 years of experience, he found it surprising that he could identify a fake bundle purely by observing it. Upon inquiring in the presence of BOE’s inspection team, explained that he judged the bundle to be fake based on its weight.
It is pertinent to mention that since shortages were also detected in packets containing fewer notes, it is plausible for an experienced cash handling officer to judge discrepancies in a packet based on its weight.
However, when the IO inquired whether Mr. James, who was present during the inspection, had observed any specific markings or identifiers on the packets that enabled Mr. Robert De Niro to recognize them as fake, Mr. James was unable to justify. Further, the FINANCIAL INTELLIGENCE UNIT team requested the Branch Management Group (BMG) to arrange a meeting with HSBC staff members, specifically Mr. David Black and Mr. Robert De Niro. Despite several reminders sent by Citibank Branch, London to HSBC, no response has been received from their side to date.
While he was away from the branch for a Cash Against Documents inspection visit, HSBC staff members, including the Manager and other officials, visited the branch to review CCTV footage of the incident dates.
Upon returning to the branch, I noticed that CCTV footage, without providing any context. Upon reviewing the footage, it was discovered that Mr. Henry (HSBC CASH PROCESSING CENTER Supervisor) was seen processing cash in our branch’s CASH PROCESSING CENTER room and appeared to be replacing cash packets in the already deposited cash bundles of HSBC.
Mr. Henry has been found involved in replacing the HSBC available chest balance with counterfeit packets by cunningly gaining access to the chest balance at CITIBANK and embezzling genuine currency. This was done with the assistance of HSBC CASH PROCESSING CENTER In-charge Mr. David Black, who coordinated Head Teller and falsely conveyed that they needed to re-verify the non-issuable balance to avoid a penalty from BOE.
Furthermore, the act of replacing counterfeit packets with genuine currency packets is substantiated by CCTV footage, which HSBC also acknowledged as evidence in their case lodged with NATIONAL CRIME AGENCY, London.
Further, the telephonic conversation between Mr. David Black and Henry is evident from the retrieved Call Data Record of Dwr Cymru of Welsh Water’s cell number, wherein their conversation is documented.
Nonetheless, the available CCTV footage clearly shows that Mr. Henry acted alone in the matter. While pretending to verify cash, he was observed replacing packets and hiding genuine cash in his socks and shoes. However, the detection of additional counterfeit notes in the chest balance at CITIBANK London raises doubts about the possibility of a single individual replacing 10,000 pounds notes during his visits to the CITIBANK cash vault.
Furthermore, both the Head Teller and Joint Official confirmed that Mr. Henry visited CITIBANK only twice for cash re-processing, with no prior visits identified. Additionally, replacing the HSBC chest balance within CITIBANK appears unlikely due to BOE’s policy, which requires CITIBANK to accept only shrink-wrapped cash. Such cash can only be opened in the presence of an HSBC representative.
Therefore, without collusion from HSBC, replacing the chest contents would not have been feasible, suggesting that the counterfeit cash was likely part of the shipment received from HSBC. Internal inquiry within HSBC CASH PROCESSING CENTER, along with investigations conducted by HSBC and NATIONAL CRIME AGENCY, could potentially highlight the involvement of individuals in the said matter.
To identify the possible collusion between CITIBANK staff members and Mr. Henry, along with other noted HSBC staff members as mentioned in various parts of this report, the FINANCIAL INTELLIGENCE UNIT team attempted to retrieve any transactional history, mobile call records, or WhatsApp chats that might establish their involvement in the matter.
However, due to the unavailability of concrete evidence, FINANCIAL INTELLIGENCE UNIT is unable to implicate CITIBANK staff members in the incident. That said, operational negligence was observed on their part, which could have potentially highlighted the issue earlier. Negligence of staff member is detailed below:-
- Dwr Cymru of Welsh Water, acting on telephonic instructions from the HSBC CASH PROCESSING CENTER In-charge, allowed Mr. Henry, an unauthorized person, to access the cash vault and CASH PROCESSING CENTER without prior approval from the Branch Manager or the Joint Official. Furthermore, Dwr Cymru of Welsh Water did not supervise Mr. Henry’s activities when he was engaged in re-processing the HSBC chest balance in the CITIBANK CASH PROCESSING CENTER.
- This lack of oversight facilitated Mr. Henry in carrying out his wrongful actions, which included replacing genuine currency with counterfeit notes and embezzling the genuine currency. Dwr Cymru of Welsh Water demonstrated clear violations of the Bank’s policies regarding supervision, Financial Intelligence Unit, and the duty to act in the Bank’s best interests. His failure to follow established procedures facilitated the fraudulent actions of Mr. Henry. His actions involved violations of the following policies and procedures of the Bank:
The 2nd official, failed to discharge his responsibilities with vigilance and due professional care. His action of opening the vault at the start of the day, and subsequently allowing the Head Teller to operate the cash vault singly without ensuring his presence during working hours, permitted unauthorized access to the cash vault and CASH PROCESSING CENTER. Had he performed his duties diligently and oversaw the entry and exit of individuals in the cash vault and CASH PROCESSING CENTER, the matter could have been identified earlier. His actions/inactions involved violations of the following policies and procedures of the Bank.
