Majority shareholder Truong My Lan controlled up to 91.5% of the bank’s shares, allowing her to install relatives, friends, and associates in key leadership roles at the bank.

Fraudulent loans, approved by complicit bank management, were reportedly issued to thousands of fabricated companies or individuals, then directed to Van Thinh Phat, a property development group chaired by Truong. Most of the loans were awarded first, then retroactively supported by fake loan applications, it’s alleged. The scheme was reportedly further enabled by complicit officials at asset valuation companies — who also falsely increased the asset values cited and certified the loans without inspection.

Authorities said Truong and the bank also colluded to bribe members of the State Bank of Vietnam’s inspection team with money and gifts. While Vietnam’s Ministry of Public Security didn’t announce the charges against Truong until November, a run on the bank had already occurred in October 2022, when Truong and bank executives were first arrested. Truong was sentenced to death by a Vietnamese court on 11 April for her role in the fraud.

Crime insurance provides coverage for employees committing loan fraud, provided it is proved they, or persons colluding with them, made a financial gain from the fraud. However, if directors are involved in fraudulent behaviour, then coverage becomes challenging as most policies exclude losses caused by fraudulent acts by directors

Binance pleaded guilty to a host of violations after a lengthy showdown with US authorities.

It entered into parallel settlements with the US Department of Justice (DoJ), the US Financial Crimes Enforcement Network (FinCEN), the US Office of Foreign Assets Control, and the US Commodity Futures Trading Commission over many incidents of illegal conduct. These include breaches of US sanctions, anti-money laundering (AML) failures and unlicensed money-transmitting activities, to name a few.

Despite being the world’s largest cryptocurrency exchange, with most of its customers based in the US, Binance did not have comprehensive Know Your Customer (KYC) protocols or systematically monitor transactions. Nor did it adequately review its systems or have qualified employees to oversee AML or KYC compliance. The exchange processed transactions associated with known terrorist organisations, cybercriminals, money launderers, child sexual abusers, dark web narcotics dealers, and other illicit actors, but never filed a suspicious activity report with FinCEN.

Instead of attempting to comply with US laws, specifically the Bank Secrecy Act, Binance had announced in 2019 that it would block all US customers and launch Binance.US, a separate US exchange. According to the DoJ, the real aim of this entity was to insulate the exchange against all US-based enforcement action, by using it as a decoy for its continued US presence. The exchange also failed to prevent US customers from transacting in sanctioned jurisdictions, encouraging clients to use virtual private networks to circumvent the exchange’s own geofencing controls.

Fines are rarely insurable (due to public policy reasons and regulatory prohibition). However, a well-drafted policy should provide coverage for costs incurred in responding to non-routine regulatory investigations into the provision of professional services

Lloyds Banking Group has made a provision of GBP450mn against the impact of a UK Financial Conduct Authority review of historic motor finance commissions. The FCA announced its review of historic discretionary commissions on January 11, following a high number of complaints to the Financial Ombudsman Service.

Lloyds customers claimed compensation over unfair commission models that predated the FCA’s 28 January 2021 ban on discretionary commissions. The regulator found that the models encouraged brokers to increase the interest rates they charged to clients. Lloyds recognised the provision in its results for Q4 2023, while maintaining it had complied with regulations. Professional indemnity insurance does not provide coverage for the repayment of commissions. Almost all professional indemnity policies will have an exclusion in that respect (often described as a fees exclusion or a disgorgement exclusion). If a settlement involves both compensatory payments and the repayment of commissions, then the compensatory element should be insured under a professional indemnity policy, subject to the policy's terms and conditions.

CaixaBank customers in Spain were defrauded of EUR110mn (USD119.2mn) after being targeted in a malware phishing campaign by criminals in Brazil.

The Grandoreiro malware was a banking Trojan programme, designed for users with a Windows Operating System. Reports first emerged in October 2023 of it being used for electronic bank fraud in Spain. The hackers sent CaixaBank customers emails masquerading as court summonses, overdue bill collections, invoices and more, infecting victims’ computers if they opened or downloaded the attachments. The malware was able to phish for victims’ credentials via pop-up windows, log keystrokes, and block local viewing to prevent being discovered.

Crime insurance for banks provides coverage for various forms of electronic fraud, including the fraudulent transfer of funds from customer accounts via hacking, so-called pull payment fraud. However, coverage for customers themselves transferring funds out of their accounts in reliance on fraudulent communications, pull payment fraud, is challenging.

TB Bank agreed a USD95mn settlement, approved by a Massachusetts court, to compensate victims of the TelexFree Ponzi scheme, which defrauded approximately 2mn supposed investors worldwide.

The USD3bn scam is believed to be, by sheer number of those affected, one of the largest frauds ever carried out. TD Bank first opened a deposit account for TelexFree in September 2012. The operator was immediately flagged for suspicious activity because its activities did not match its business profile. On top of which, media coverage at the time described TelexFree’s activities as fraudulent. And even though TD closed the firm’s initial account in July 2013, it opened a second and even a third and fourth account. Through its due diligence, TD was aware of legal claims against TelexFree in Brazil, and expressed its concerns to the company. Yet the bank still opened the new accounts in August and September 2013, and processed large transactions between them. TD eventually closed the third account, and refunded USD18mn to TelexFree — but, even then, it broke the payment down into smaller sums at TelexFree’s request to avoid red flags.

Professional indemnity insurance may be able to respond to a loss of this nature, given the core coverage applies to claims in respect of failures in the provision of professional services. However, policies can be restricted to coverage for claims brought by customers of the insured. If that is the case, a policy will not respond to claims by non-customer third parties impacted by the insured's failures (as appears to be the case here).

Prudential Financial has reached a USD35mn settlement with investors who purchased its common stock in the summer of 2019, but claimed the insurer had overstated its results in regulatory and quarterly filings throughout early 2019, resulting in the stock trading at artificially high prices.

In 2013, Prudential had purchased around 700,000 life insurance policies from Hartford, for which it had struggled to accurately reserve. This was due in part to extreme deviations in mortality experience. In February 2019, the insurer began a review of actuarial assumptions, which it failed to disclose. On 31 July 2019, Prudential announced that changes in mortality assumptions would reduce life insurance earnings by USD25mn a quarter for the foreseeable future, and that it would institute a one-time reserve increase of USD208mn. Investors claimed that by not disclosing the review, Prudential had omitted material facts pertaining to its reserves, its assumptions and reserve adequacy from its financial results and future prospects. Corporate Securities Claims coverage (aka Side C) can be purchased under Directors' and Officers' (D&O) policies. In short, it provides coverage for claims against the insured company by its shareholders and bondholders in connection with its shares or bonds. Claims of the type against Prudential are common under Side C coverage, i.e., claims by shareholders alleging misstatement of financial information which has resulted in the insured company's shares trading at artificially high prices (and therefore causing financial loss to shareholders who bought shares at the top).