The Serious Fraud Office (SFO) and City of London Police are investigating an alleged fraud on Allied Irish Banks‘(AIB) corporate banking department.

Yesterday, it searched the central London-based business address and two residential addresses of the unnamed suspect.

Between 2003 and 2007 Allied Irish Bank provided loans to companies controlled by someone now suspected of serious fraud, it said.

After discovering that the guarantees of some lease payments on a portfolio of UK investment properties were, in fact, fraudulent, AIB took control of and sold the relevant properties.

The sale saw a write down of the outstanding loan balances by £56m.

The suspect is not thought to have worked alone, and the SFO believes that further financial institutions have also been deceived by the suspects.

AIB is considering legal action against a number of parties in respect of its deficit.