The former chief executive of National Irish Bank, Mr Jim Lacey, insisted NIB's branch managers were more righteous than their competitors regarding non-resident accounts and were prepared to lose business rather than break the law. The smallest of the four main banks has nonetheless set aside £1 million to cover tax liability on such accounts.
Mr Lacey told the Public Accounts Committee that while it was an "open secret" other banks were providing bogus non-resident accounts for customers who wished to conceal funds from the Revenue, his managers knew NIB would not tolerate such actions.
During his tenure as chief executive between 1988 and 1994, NIB was under huge pressure to gain market share. The tiny bank at that stage was seeking to restore itself to profitability and desperately wanted to make its presence felt in a market dominated by AIB and Bank of Ireland.
Branch managers had aggressive targets to meet, with some more focused on expanding their deposit base and others charged with expanding the loan book. NIB needed to attract substantial deposits to allow it to fund competitively the mortgages and business loans it was offering, he said.
NIB's competitors were chasing the same deposits and, because some were prepared to provide bogus non-resident facilities to certain customers, NIB was often at a competitive disadvantage, according to Mr Lacey.
He said he had received complaints from a number of branch managers about the amount of money they were losing to their rivals because of the strict policy of the bank. Sometimes, the former chief executive explained, he would dismiss such comments as "an excuse" from someone who simply wasn't doing the business for the bank.
He stressed that at all times he would tell his staff they must open non-resident accounts only for genuine non-resident customers. Mr Lacey said he told bank managers even if they got no deposits they weren't to open bogus accounts. "It was an open secret that people in the same community were doing it and you had to ensure they (NIB's managers) didn't weaken in any way," he said.
The audit reports detailed in the Comptroller and Auditor General's Report show that in line with the rest of the financial community, NIB was successful in attracting substantial funds into non-resident deposit accounts during that period. Between 1986 and 1998 its shows NIB's non-resident deposit book varied between £92 million and £261 million.
The audits also show that a large number of the branches which opened these accounts had either no non-resident declaration from the account-holder or the declaration was incomplete. Without the necessary declarations the 1986 legislation stipulates that non-resident accounts are liable to DIRT. NIB has now acknowledged that the total amount of DIRT it could owe as a result of this non-compliance is £1 million. This figure includes potential penalties. Mr Lacey has strongly denied that many of these accounts were bogus. He repeatedly explained to the committee that just because the auditors didn't see the declarations during their visit, it didn't mean they couldn't be found.
The high incidence of incomplete declarations could also be easily explained, he told the committee, pointing to the complex nature of those forms and the daily pressure of business on bank staff.
Mr Pat Rabbitte TD referred Mr Lacey to the declaration form which required such basic information as branch details, the account number and the customer's name. "They are scarcely onerous and not beyond the average official with a Leaving Certificate," he suggested.
A list of incomplete documentation was also discovered where staff had opened special savings accounts for customers. A DIRT liability will also arise in relation to those accounts.
NIB's current chief executive, Mr Don Price, has accepted that where accounts were wrongly classified, there is an onus on the bank to pay arrears of DIRT. And like Mr Lacey, he contended there is no evidence to suggest significant abuse of non-resident accounts within NIB. Its shortcomings in relation to DIRT were due to "procedural weaknesses" which the bank regrets, he said.
More recent controversies at NIB, including its offering of offshore insurance-linked deposits to customers in the Isle of Man, are likely to be examined further today.