Financial adviser Earl Jones, right, pleaded guilty last month to two counts of fraud totalling roughly $50 million. (Graham Hughes/Canadian Press)

The Royal Bank of Canada knew disgraced Montreal financial adviser Earl Jones was using his personal account for business and passing it off as an in-trust account, The Fifth Estate has learned.

But the bank denies there were any indications that Jones was using his account inappropriately.

According to a confidential internal memo obtained by The Fifth Estate, Jones was warned "he could get himself in trouble because this is just a personal account in his name alone, the in trust does not mean anything …"

The memo was dated Nov. 7, 2001. But the matter was dropped and Canada's largest bank allowed Jones to keep doing business as usual.

Jones had a personal account with the Royal Bank but told his clients it was an "in-trust" account. The only problem the bank had was that Jones was operating his business through the account, and it asked him to open a commercial account in 2008.

Wayne Bossert, executive vice-president of RBC, said Earl Jones did what many entrepreneurs do — start small, using personal accounts to operate their business.

Asked whether it was wrong for the bank to let his clients believe Jones was putting their money into a trust account, Bossert said: "Jones illegally used our letterhead, our logo, in other ways of applying legitimacy to his fraud."

"We had no knowledge of that. What we understood of Mr. Jones is he was an administrator of trusts and estates. A very legitimate business and a legitimate business for him to be in."

Bossert denied that any alarm bells went off before 2008.

"We saw no signals that there was any abuse, any suspicious transactions through the account. There was nothing to signal that this person was anything other than a legitimate successful businessman."

Last month, Jones pleaded guilty to two counts of fraud totalling roughly $50 million. The charges covered his 27-year career as a financial adviser on Montreal's West Island. Authorities have confirmed that Jones bilked 158 clients out of $50.3 million.

Neil Stein, a lawyer representing most of the victims, said Jones would commingle everything into one bank account, called "Earl Jones in trust" that he would use "as his own piggy bank."

"When you're opening up an account in trust for somebody, it's clear, or it should be clear to the bank and everybody, that that account is not being opened for your personal benefit, but rather for and on behalf of some other person or entity."

Stein said he wants to know why the Royal Bank never questioned how Jones was using his account.

"More than red flags should have gone off, from what I've seen," he said.

"There are obvious instances when you see cash being withdrawn from a trust account, when you see credit card bills being paid from a trust account, when you see a debit card being issued on a trust account. That shouldn't happen. "