NIB identifies bogus non-resident accounts

Bogus non-resident accounts have been identified at National Irish Bank branches throughout the state and the bank will is now expected to be among the financial institutions called before the Dail Committee on Public Accounts (CPA) later this year.

The bank is currently trying to assess the size of the problem and expects eventually to have to make a settlement with the Revenue for unpaid Deposit Interest Retention Tax (DIRT). The bogus accounts difficulty comes in the wake of controversies concerning overcharging by the bank and its sale of unauthorised offshore bonds.

The bogus accounts are both currently existing and former accounts and it is the bank's view that the exact extent of the problem will be impossible to quantify. DIRT collection by financial institutions was introduced in 1985. NIB bank managers have told the two High Court inspectors appointed to investigate NIB in the wake of the overcharging and offshore bond affairs, that they accepted bogus non-resident accounts because if they did not they would lose the business to other financial institutions.

It is unclear as yet whether new powers recently given to the Revenue will make it possible for it to identify depositors who have funds in bogus non-resident accounts identified in NIB and other financial institutions. The Revenue was able to use other powers to force NIB to disclose the identities of the individuals who bought the offshore bonds the bank was promoting, and it is likely that a least some of these people will have to make settlements with the Revenue. About £50 million (#63.5 million) was lodged in the unauthorised bonds, some of it money that had previously been lodged in non-resident accounts.

Mr Tom Grace and retired Supreme Court judge, Mr John Blayney SC, the two High Court inspectors inquiring into the bank, the Comptroller and Auditor General, Mr John Purcell, who is conducting an inquiry for the CPA, and NIB itself, are all investigating the extent of the bogus non-resident account problem.

Mr Purcell's office has been making inquiries of the Revenue Commissioners and is likely to soon begin asking NIB about its operation of non-resident accounts. Mr Purcell is conducting an industry-wide inquiry and is expected to report to the CPA in June. Public hearings are expected to take place in July or September.

The Dail introduced special legislation to allow Mr Purcell conduct his inquiry after a conflict emerged between AIB and the Revenue during CPA hearings concerned with DIRT and bogus non-resident accounts.

At those hearings AIB's group chief executive, Mr Tom Mulcahy, said bogus non-resident accounts were an "industry-wide" problem in the late 1980s and early 1990s.

AIB argued that a settlement it made with the Revenue in 1991 involved no retrospective DIRT payments from before April 1990. The Revenue has denied that any such understanding existed. It is understood NIB will not argue that it ever came to any such understanding with the Revenue.

While the CPA initially wanted Mr Purcell to investigate AIB, it has transpired that his inquiry is into all 37 financial institutions registered as DIRT collectors. The institutions act as agents for the Revenue in the collection of the tax.

It is understood Mr Purcell felt it would be more appropriate for his office to inquire into the efficacy of the institutions in collecting the tax, as against inquiring into a single institution, AIB.

It is expected that all the institutions found to have or have had a problem with bogus non-resident accounts will be named by the CPA and representatives called to be questioned at the public hearings. The hearings will be recorded for TV and may even be broadcast live.