Bank of Bermuda's recorded loss of $4.7 million for a credit card fraud could just be the "tip of the iceberg" according to Canada's Financial Post.

The publication focused on the fraud that hit the bank last year and was first mentioned in the bank's annual report, published at the beginning of the year

The Post reported the Bank of Bermuda "has been forced to swallow losses" after "unwittingly agreeing" to provide credit card processing services to a group of alleged telemarketing fraudsters based in Vancouver, British Columbia.

The losses stem from Visa and MasterCard requirements that leave banks on the hook for inappropriate credit card charges made to customer accounts.

The scam was also highlighted in the newsletter "Inside Bermuda" which named documents listed in the Federal Trade Commission in the District of Washington on December 11, 2000 which listed over a dozen defendants and said that the scam included the sale of British Premium Savings Bonds which are not allowed to be sold in the US. Those taken in by the fraud received nothing in return for their cash.

The Post said the main players alleged to be in the scam were rounded up following a joint investigation involving the RCMP, the FBI and Bermuda police.

"It was one of the biggest telemarketing operations we have gone after," said Glenn Kirkpatrick, manager of interjurisdictional operations at the B.C. solicitor general's office told the Post.

In total, as many as 100 telemarketers were involved, said Mr. Kirkpatrick in the article. The alleged ringleader, he said, was Timothy Babuin, a Vancouver man arrested in December, 2000. He has been charged in the US with telemarketing fraud. He has not been convicted.

According to the US Federal Trade Commission, the telemarketers went after seniors in the United States, offering a range of investments with substantial interest rates.

The Post said: "For instance, some victims were allegedly offered regular monthly payments of up to $12,000 in exchange for a one-time payment of up to $5,000. As well, the telemarketers sometimes billed victims' credit cards without contacting them, said the FTC, which filed a civil complaint against the telemarketers."

Inside Bermuda said First Atlantic Commerce picked up suspicious activity on the account within six weeks of it being set up and notified the Bank of Bermuda, who then alerted the authorities in Bermuda, the US and Canada.

The Post added: "The Bank of Bermuda losses may be only the tip of the iceberg. Mr. Kirkpatrick said total losses were about $30 million."

The Post said that also hurt was a Bermuda-based e-commerce provider First Atlantic Commerce, which was working with the bank to process the transactions.

The multi-million dollar loss for the bank is in addition to the bank taking a nearly $26 million hit in the last two years with investments in two start-ups, First Ecom and Measurisk.

The losses relating to credit card fraud reportedly occurred in 2000, but details of which were only released this year in the Bank's 2001 annual report. As a result of agreements with certain online merchants, First Atlantic Commerce (FAC) was the processor of credit card transactions that were then passed on to the Bank of Bermuda for settlement. There are no allegations of fraud in Bermuda, but in accordance with credit card procedures, the card processors have been liable for the fraudulent credit card charges.

The loss was initially estimated at $7 million but income/(loss) adjustments of $2.3 million show the Bank to be out in the end by $4.7 million.