AIB In The Firing Line Over BVI Transfers

by Jason Gorringe, Tax-News.com, London

31 May 2004

After an internal investigation, Allied Irish Banks has disclosed that it operated what it called 'inappropriate' share transactions routed via the British Virgin Islands between 1989 and 1996.

The 8-month investigation was prompted by the Irish Financial Services Regulatory Authority, and uncovered the use of a BVI company called Faldor by AIB's Investment Managers fund management unit (AIBIM) to channel trading profits from share allocations in IPOs and other share issues. The bank said it appeared that AIBIM had 'favoured' Faldor at the expense of other in-house accounts, mentioning 'unacceptable deal allocation practices relating to nine transactions from 1991 to 1993 amounting to Euros 174,000'.

Ireland's Investment Management Act, which made such practices illegal, was passed only in 1996, the year in which the AIBIM ceased its questionable activities, but the bank admitted that tax of Euros 800,000 was due in respect of the period investigated, which it said it would pay.

Michael Buckley, AIB Chief Executive, had management responsibility for the AIBIM unit from 1991 to 1993, but it is not clear whether he knew about the use of Faldor. After surviving the US$691m foreign exchange scandal at AIB's US Allfirst unit, Mr Buckley has come under further pressure recently with revelations that the bank overcharged customers up to Euros 25m for foreign exchange transactions.

Mr Buckley refused last week to appear before the Dail's finance and public services committee to answer questions over mismanagement at the bank, leading Sean Fleming, chairman of the committee, to write to Dermot Gleeson, the bank's chairman. Some committee members are said to be searching for a way of compelling the bank to appear.

AIB shares closed 35 cents down at Euros 11.64 in Dublin on Friday.

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