By Peter Thal Larsen

Financial Times, May 2 2008

City of London police yesterday said they had charged Jagmeet Channa, a 25-year- old man from east of London, with conspiracy to defraud, money laundering and abusing a position of trust.

According to people familiar with the matter, HSBC discovered last week that an employee transferred about €90m ($140m) from an account used by HSBC's corporate trust division, which handles large cash transactions on behalf of clients.

HSBC noticed the discrepancy within hours of the transfer taking place and alerted the police.

The bank then quickly reversed the transfers.

Another three men are still in police custody.

Although HSBC declined to comment on the details of the alleged fraud, it stressed that no customer funds were involved and that neither the bank nor its customers had lost any money.

The case highlights the continuing risks that banks face from employees who are responsible for handling large sums of cash.

Despite elaborate risk controls designed to prevent fraud and theft, bankers say they still face the risk that a determined employee will circumvent those controls.

HSBC said: "HSBC is co-operating fully with a police investigation into an alleged fraud at the bank. As the matter is before the courts, we cannot comment further. No customer funds were involved and no transactions were disrupted.

No customer or bank funds were lost in the alleged fraud."

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