Allied Irish Bank is to be investigated by the Serious Fraud Office

Fraud probe: The SFO is investigating a £56m property scam.

The SFO and City of London Police raided three business and residential addresses in central London yesterday, although no arrests have been made.

The allegations centre on loans made by the bank to the main suspect to buy UK properties, based on fraudulently high levels of rents and lease lengths.

Other financial institutions may also have fallen prey to the alleged fraudsters, the SFO added. The loans were made between 2003 and 2007, although AIB's corporate banking department uncovered the issue only last year before informing the authorities. The SFO said the suspect provided lease guarantees from a blue-chip property company which turned out to be false.

Companies linked to the fraudster are said to have set up leases for longer periods and at higher rents than existing occupational tenants. These additional leases increased the value of the properties involved, the SFO said. AIB, which is considering legal action against a 'number of parties' over its losses, refused to give any further details. It said: 'AIB identified the issue and referred it to the appropriate authorities. The writedown was fully accounted for in our 2008 results. 'We cannot comment further on the investigation at this stage.' The Dublin-based bank unveiled a 62% fall in annual profits to 1.03bn euros (£959m) earlier this month.

The loans were made between 2003 and 2007, although AIB's corporate banking department uncovered the issue only last year before informing the authorities. The SFO said the suspect provided lease guarantees from a blue-chip property company which turned out to be false. Companies linked to the fraudster are said to have set up leases for longer periods and at higher rents than existing occupational tenants. These additional leases increased the value of the properties involved, the SFO said. AIB, which is considering legal action against a 'number of parties' over its losses, refused to give any further details. It said: 'AIB identified the issue and referred it to the appropriate authorities. The writedown was fully accounted for in our 2008 results. We cannot comment further on the investigation at this stage.'

The Dublin-based bank unveiled a 62% fall in annual profits to €1.03bn (£959m) earlier this month.

Courtesy of This is Money