Allied Irish Banks plc and its subsidiary Allfirst Financial Inc. have decided to fire several senior executives to address the issues raised by the fraudulent trading activities engaged in by former Allfirst trader John Rusnak.

It is alleged that Rusnak lost US$691 million over several years through his trades. Today the bank reported its conclusions from an investigation, including: the fraud was carefully planned and meticulously implemented by Rusnak, extended over a lengthy period of time, and involved falsification of key bank records and documents; Rusnak circumvented the controls that were intended to prevent any such fraud by manipulating the weak control environment in Allfirst’s treasury; his trading activities did not receive the careful scrutiny that they deserved; risk managers, senior management and Allfirst internal auditors did not appreciate the risks associated with Rusnak’s foreign exchange trading.

It also found that Allfirst and AIB senior management heavily relied upon the Allfirst treasurer, “In hindsight, this heavy reliance proved misplaced.” It also said that nothing indicates that anyone at AIB or Allfirst, outside of the Allfirst treasury group, were involved in the trading.

The review was handled by Promontory Financial Group headed by Eugene Ludwig, former U.S. Comptroller of the Currency, and Wachtell, Lipton, Rosen and Katz, the prominent New York law firm. Ludwig said, “Our report is critical of certain internal controls at Allfirst and a number of individuals in these structures, particularly at Allfirst Treasury. We have made some strong recommendations in that regard. I am cheered that the AIB and Allfirst Boards and managements are adopting those recommendations. It is also important to recognise that Allfirst and AIB are financially healthy, solid organisations and they are fully capable of dealing with the loss and implementing our recommendations to strengthen their respective control structures while maintaining strong capital levels.”

Rusnak has already been dismissed. To address the compliance failure, the board has decided that individuals who were directly responsible for oversight of Rusnak’s activities, will be dismissed: David Cronin, executive vice president and treasurer of Allfirst; Jan Palmer, senior vice president Treasury Operations Administration; Robert Ray, senior vice president Treasury Funds Management; Lawrence Smith, assistant vice president Operations and Financial Analysis; Michael Husich, Head of Internal Audit; and Lou Slifker, Team Leader, Internal Audit.

Lochlann Quinn, chairman and Michael Buckley CEO, AIB Group offered their resignations to the board. But the board decided unanimously to endorse the positions of Quinn and Buckley and to reaffirm its full confidence in both men. The firm is also instituting a slew of compliance changes.