The UK regulator, the Financial Services Authority, has started a formal investigation into Coutts & Co over its sale of American Life Insurance Company bonds, the private bank’s parent company, Royal Bank of Scotland said on Friday.

The probe, which the FSA launched late last month, will focus on the process concerning the bank’s sale of ALICO’s Premier Access Bond Enhanced Variable Rate Fund to clients between 2001 and 2008, and its subsequent review of those sales, RBS said in a statement, adding that the company and all its subsidiaries were “cooperating fully” with the probe.

It is understood that the FSA has not yet set any specific timelines for the duration of the investigation.

Coutts – like a number of other wealth managers and private banks – has come under fire from disgruntled clients over losses related to the credit crisis, with many such cases focusing on the alleged mis-selling of investments.

Last year Coutts faced the wrath of UK business tycoon Sir Keith Mills after the private bank allegedly advised him to invest in the crisis-hit AIG Life Enhanced Fund, which was frozen in September 2008 and subsequently closed two months later.

Sir Keith, who launched a high-profile media campaign against the bank, claimed that Coutts had recommended the fund as a safe way to protect his capital, which would provide “instant access” to his money (thought to be some £70 million in this particular investment). Coutts, for its part, emphatically denied any wrongdoing, saying that the product had been sold as a “low risk, not no risk” product where the value of the investment can go down as well as up.