Anglo Irish Bank’s subsidiary in Austria linked to secret deposit schemes

Austrian bank sought business from firm that set up offshore trusts for customers


Anglo Irish Bank’s subsidiary in Austria sought out business from a company that set up offshore trusts for customers, recommending the Irish-owned bank in Vienna as a good place to deposit money secretly.

Records relating to the Austrian business of the now defunct Irish bank, dating back to when Anglo was at its peak, are among more than two million secret files obtained by the International Consortium of Investigative Journalists (ICIJ) that expose covert companies and trusts in the British Virgin Islands, the Cook Islands and other offshore havens.

In 2006, a senior executive at Anglo Irish Bank (Austria) wrote to the Portcullis Trustnet, the Singapore-based company which has helped tens of thousands of people set up offshore companies and trusts, praising the benefits of Austria’s strict banking secrecy laws.

The bank executive recommends the merits of opening up a bank account in Austria instead of in Switzerland, where banks religiously guard the secrecy of their customers. He said bank employees in Austria were prohibited from divulging information to outside parties under the country’s laws.

“While Switzerland is undoubtedly the world’s best-known private banking centre, neighbouring Austria offers similar facilities and, in addition, deliberately keeps a lower profile,” Florian Koschat. vice-president of Anglo Irish Bank (Austria), said in his email to the company.

‘Smooth and quiet’
“Investors around the world have learned to appreciate the smooth and quiet way in which Austrian banks conduct business with their customers.”

Austrian bank secrecy laws forbid banks to “disclose or make use of secrets which have been entrusted or made accessible to them solely due to the business relationships with customers”, he said.

In a detailed presentation on Anglo Irish Bank in Ireland sent to the offshore company formations agent by Dr Koschat, the Anglo-owned bank also refers to Austria as an ideal country for private bank because there is a limited tax liability for non-residents and because banking secrecy is “in the rank of constitutional law”.

Other records at Portcullis Trustnet show that, in subsequent years, deposit accounts were set up at Anglo Irish Bank, both in Austria and in the bank’s operations in the Isle of Man, for offshore entities.

They include an account in Vienna set up on behalf of a trust based in the Cook Islands on September 29th, 2008, when Anglo was scrambling to raise money to counter a run on the bank and the day before the government intervened to save Anglo from collapse with the bank guarantee.

Bank records show that an American citizen, a dental surgeon in the state of Maine, was the trust’s beneficial owner and his deposit amounted to several hundred thousand euro on a high rate of interest. Asked whether Anglo’s Austrian bank facilitated tax evasion for customers, Dr Koschat, now executive director of Vienna-based financial company Pallas Capital Holding, declined to answer any questions and referred queries to Anglo.

Follow-up email
In response to a follow-up email, he said he was “not entitled to discuss any information regarding former employers with you or any third party for that matter”.

Anglo bought the Austrian bank from Royal Bank of Canada in 1995. The Vienna-based bank was then known as Royal Trust Bank (Austria) and was attractive to Anglo as it had €300 million in deposits that could fund new lending.

Anglo sold the Austria private banking business to a Swiss broker Valartis in 2008 making a profit of €49 million. The bank itself part-funded the Swiss firm’s €141 million purchase of the Austrian subsidiary with a loan of €24 million.

The deal was signed off on December 19th, 2008, the day chief executive David Drumm resigned and a day after the departure of chairman Sean FitzPatrick, who stood down over his concealment of multimillion director loans at the bank.

The sale of the bank and the loss of the €600 million in deposits held in the Vienna-based subsidiary was seen as odd at a time when the bank was trying to hold on to deposits and raise fresh funding as the financial crisis was worsening.

One former senior Anglo banker said Mr Drumm had been uncomfortable about the Austrian bank and the source of its deposits, and feared that it might have drawn Anglo into a tax evasion controversy, perhaps involving US customers.

The official reason given to investors for the sale was that it formed part of the bank’s disposal of non-core assets to focus on lending in Ireland, Britain and the US, and its wealth management business in Ireland and Britain.

Cross-border Mafia claims
It emerged in 2010 that the Austrian bank had been drawn into an alleged €2 billion cross-border Mafia money-laundering racket in a case taken by Italian public prosecutors who claimed that the subsidiary was one of three banks used to move money from a telecoms firm in Italy between 2005 and 2007.

Anglo was nationalised by the Government in January 2009. The Irish property crash left the bank nursing heavy losses forcing the Irish State to cover the shortfall with a €29 billion bailout.

Secret files on offshore companies

A single computer drive loaded with more than 2.5 million files on offshore companies and trusts led to a 15-month investigation by journalists around the globe that has revealed secret financial dealings of people.

The cache of files obtained by International Consortium of Investigative Journalists, led by Irish journalist Gerard Ryle, has shed light on more than 120,000 offshore companies and trusts set up in the offshore tax havens of the British Virgin Islands in the Caribbean and the Cook Islands in the south Pacific.

The database includes the names of American doctors and dentists, Wall Street executives, eastern European and Indonesian billionaires, Russian oligarchs and international arms dealers.

The Washington DC-based non-profit investigative organisation gave The Irish Times exclusive access to the database of records ahead of the scheduled public release of the database tomorrow.

The names of more than 40 individuals and companies with registered personal or business addresses in Ireland are listed in the database. They range from a former billionaire businessman to investment managers, from accountants to solicitors, and from fishermen to company executives. Most of the records date back to the early and mid-2000s and a number of the Irish individuals involved in the offshore companies, trusts and partnerships are now deceased.

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