Kaupthing under investigation for fraud

| December 16, 2009 | 0 Comments

An investigation is underway at Kaupthing - the Icelandic bank which collapsed last autumn.

Kaupthing, which was once Iceland’s largest bank, collapsed along with Glitnir and Landsbanki at the height of the banking crisis last year and all three banks had to be nationalised.

This led the Iceland Government to seek billions of dollars worth of aid from the International Monetary Fund, as well as a loan from the European Union to help it survive the financial turmoil.

Meanwhile, the Serious Fraud Office (SFO) said it was investigating “suspected fraud offences committed within the UK jurisdiction, prior to the bank’s collapse in October 2008.”

An SFO spokesman said, “This is a complex investigation which crosses numerous jurisdictions. We have been working closely with the Icelandic Special Prosecutor’s Office to ensure that comprehensive and robust investigations are conducted both in Iceland and the United Kingdom and to ensure that there is no duplication of effort. We will continue to do so.”

The SFO also said it is investigating why a significant amount of funds left the bank in the days before it collapsed.

Over 30,000 British citizens, charities, councils and organisations put their money in the Kaupthing Edge deposit account before it went into administration and they lost an estimated £2.4 billion.

The incident created tension between the UK and Iceland over who should compensate British savers. The UK was forced to intervene on behalf of savers to ensure money was returned to them.

Separately, last week it was revealed that Iceland’s economy plummeted at its fastest pace on record in the third quarter, falling by 5.7% compared to the previous quarter.

However, on an annual basis the economy contracted by 7.2% - the biggest fall on record.

Many economists are expecting Iceland’s economy to continue to contract next year.

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