AIB admits to irregularities in offshore fund dealings

AIB has admitted to new irregularities involving former and current senior executives and their connections with offshore funds.

In a statement the bank said that five former senior executives had offshore funds in an investment company managed by the bank's offshore wing, AIB Investment Managers (AIBIM).

AIB said initial inquiries showed that the investment company in question, Faldor Ltd, may have been involved in tax evasion. Late last August, the Managing Director of AIBIM, a subsidiary of AIB, was made aware of a connection between the bank and the British Virgin Island investment company.

Faldor was formed in 1989 and ceased in 1996. The funders and beneficiaries of Faldor were five former senior executives of AIB and the funds were managed by AIBIM.

AIB management and the board of the bank were immediately informed, the statement adds, and an investigation set up to ascertain the facts surrounding the relationship between AIBIM, Faldor and the former senior executives.

The investigation found that the amount of funds in Faldor was approximately €750,000 and that there was a breach of taxation law in relation to the company. It also found Faldor appears to have been favoured to the tune of €48,000 at the expense of AIBIM.

There was no evidence that AIBIM clients were disadvantaged, but "unacceptable deal allocation practices" relating to nine transactions in the period 1991 to 1993 were identified. Two former and three current senior executives at AIB had tax issues, the inquiry found, in relation to accounts "entirely unconnected" to Faldor.

Following the initial inquiry, AIB and IFSRA agreed that a further investigation would be supervised by Dr Maurice O'Connell, the former governor of the Central Bank of Ireland. Both investigations have concluded.

Taxation consequences of some of the practices uncovered in the investigations amount to about €800,000, comprising tax, interest and penalties. AIB has said it will underwrite these. The Revenue Commissioners have been informed of the issues, but AIB has not named the individuals involved, for legal reasons.

In a statement, IFSRA said the investigation at AIBIM concerned "taxation, inappropriate dealing transactions and other regulatory issues."

"We note that AIB has already taken action on some of these issues, including disciplinary measures. We also note that AIB has committed to pay restitution plus interest to affected clients," the statement said.

AIB Chairman Mr Dermot Gleeson said: "I received this information, as I received the news of the foreign exchange charges issue, with dismay. This is a reaction which I know is widely shared throughout the whole of AIB up to Board level."

The bank's Group Chief Executive, Mr Michael Buckley, said the practices uncovered had "no place in AIB".