Bank drafts worth €2.7 million at the centre of a fraud case may leave falsetrail, writes Colm Keena.

The seven sterling bank drafts totalling €2.7 million in value which are at the centre of the Hibernian Insurance fraud case, were marked non-negotiable and so in theory must be lodged to an account by whoever holds them.

If the drafts are lodged to an account and then presented to the issuing bank, AIB, it would create a paper trail leading back to the account or accounts to which the monies were lodged.

However, according to sources, criminals often establish ways of laundering such drafts. In the Hibernian case, the payees on the drafts were three dormant or dissolved companies with identical addresses in Washington Street West, Cork. These companies had no outstanding claims with the insurance company. It is possible those involved used the names of these companies to establish bank accounts in their names, possibly in Northern Ireland or the UK.

Furthermore, it is possible the drafts could be used in transactions whereby innocent parties would be given the drafts in payment for goods or property.

The insurance company is due to return to the High Court today to seek the continuation of an order issued last Friday and to instruct AIB not to honour the drafts. Meanwhile, the Garda Bureau of Fraud Investigation is continuing its investigations.

Without an order, the issuing bank, AIB, would have been obliged to honour its drafts.

One of the drafts, for £550,744 sterling (€781,752), was presented for payment on Friday in the hours before the High Court hearing. It was not honoured.

In an affidavit to the court on Friday, Mr Pat Creighan, executive manager with Hibernian, said sterling drafts were used to make claims payments to persons or entities outside the Republic. Usually the amounts involved were significantly smaller than the amounts at issue in the suspected fraud.

The court was told that Hibernian has foreign draft application forms at its claims technical units and that these are used when applying to AIB for a draft. Each application is signed by a claims manager. In cases where the amount is greater than €20,000, two signatures are required. In the case of the seven drafts at issue, the form stipulated the payees to be the three companies with addresses in Cork.

The insurance company's bank, AIB, Grafton Street, Dublin, is given advance notice by fax of drafts that will be required. The drafts are released to a courier upon production of an application form from Hibernian.

A claims handler in Hibernian's technical unit in Galway returned from holidays in the second week of September and began to check claims that had been processed while she had been away. She could not satisfy herself in relation to seven drafts. The company established that the signatures on the seven associated application forms were not true signatures of managers authorised to sign the forms.

An official from Hibernian telephoned AIB, Grafton Street, on Thursday, September 11th, at 11.30a.m. At first the bank believed the drafts could be stopped if a letter instructing it to do so was sent by Hibernian. However, later that day AIB informed the insurance company that drafts were like cash and could not be stopped without a court order. If the drafts have been lodged to an account here or abroad, or given to a third party, they are likely to pass through the banking system and be presented to AIB, Grafton Street, over the coming days.