29 July 2004 Edition

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€100 million banking fraud


Could there have been a cover up?

Two reports on banking malpractice published in recent days have highlighted over €100 million in fraud through either non-payment of tax or overcharging customers. In the case of both National Irish Bank (NIB) and AIB, investigations are ongoing into illegal banking practices that ran throughout both organisations.

An interim report from the Irish Financial Services Regulatory Authority (IFSRA) found that AIB had overcharged foreign exchange customers since 1995 to the tune of €34.2 million. The IFSRA inquiry also uncovered 24 other areas where 70,000 customers had been overcharged running to €8.1 million of overcharging.

NIB's tax and overcharging fraud runs to a total of €64 million and the findings of High Court inspectors into the bank were described as "very serious" and "of the utmost gravity".

NIB had allowed the opening of bogus non-resident accounts throughout its branch network, allowing customers to avoid tax illegally. They also allowed customers open accounts in fictitious names to evade tax. The bank allowed the use of Clerical Medical Insurance polices as a method of investment, where the funds put into these policies were never disclosed to the Revenue Commissioners.

However, this was where NIB's generosity to their customers ended, the High Court inspectors also found that there was improper charging of interest and fees to customers. The full 200-page report on NIB will be published Friday 30 July.

The AIB report was an interim one and now the regulator will turn attention to whether there was a cover up at AIB. The disclosure of overcharging only became public knowledge through a whistleblower contacting the IFSRA on 20 April, with AIB admitting to the regulator and the media that there was a problem on 6 May. The full NIB and AIB reports should make interesting reading.

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