The following is the full text of the statement issued by National Irish Bank yesterday:Internal Investigation
National Irish Bank is actively pursuing an investigation into the basis for allegations first broadcast by RTE television on Friday last, January 23rd. The investigation is being carried out by an international audit and compliance team from the European headquarters of NIB's parent, National Australia Group Europe, in conjunction with the bank's lawyers. NIB is a financial institution of good standing which is committed to the highest standards of compliance and best practice in banking. This announcement addresses the serious issues raised by the theft of confidential information from the bank and the allegations against the bank made by parties relying on this information.
It is NIB policy to contribute in any way it can to improving standards and practices in the banking industry as a whole. NIB does not condone, encourage or knowingly engage in tax evasion. In common with the rest of the financial services industry, NIB has put in place safeguards and procedures to minimise the possibility of abuse of the system by tax evaders and money launderers. Both the Central Bank and the Revenue are aware of the lengths to which the banks go to avoid such abuses. The problems faced by NIB in this area are not unique and NIB notes that the Revenue are to carry out checks in this area.
Preliminary findings of the NIB internal investigation indicate that confidential documentation has been unlawfully removed from the bank by disaffected parties with malicious intent. The information has been provided to the media and political sources through an intermediary in a manner designed to inflict maximum damage on the bank, its staff and customers. The bank has a duty of confidentiality towards its customers and will vigorously pursue legal avenues to recover this stolen material and to bring to account all parties associated with the theft. The resources of its parent are being utilised in this respect.
The information has been used to construct allegations relating to less than 0.1 per cent of the bank's accounts. The allegations have been selectively presented to create a misleading impression and one which is not representative of the manner in which the bank conducts its business.
The bank regrets any distress caused to staff or customers by these developments. The bank would particularly like to commend the high standards of service, loyalty and ethical behaviour practised by the general body of its employees.
NIB does not sell its own life assurance products but, in common with other banks, acts as an introducer for the products of other financial institutions. Among these institutions is CMI Insurance Company Limited, an Isle of Man-based subsidiary of Clerical Medical International (CMI), a long established UK company which is a subsidiary of Halifax plc. The Personal Portfolio was the principal CMI product marketed by NIB. This is a life assurance policy.
In return for customer introductions, NIB received a commission from CMI for business introduced. Payment of commission is a standard practice in the industry. Commission is payable to the bank and not to individuals employed by the bank.
CMI policies offer investors the facility to nominate investment advisers in relation to the funds invested under their policy. Policy holders introduced by NIB generally nominated NIB as their investment adviser, a practice encouraged by NIB to secure an ongoing relationship with both the customer and CMI.
To acquire the life assurance policy, the customer had to pay a capital sum to CMI which CMI then invested to secure the capital value of the policy. Once invested in the policy these were CMI funds and the policy holder was not entitled to gain direct access to them. To gain access to these funds, policy holders would first have to encash their policy in whole or in part.
When making introductions to CMI, NIB encouraged those customers seeking an IR£denominated bank deposit investment to direct CMI to put the policy funds on deposit with NIB. A large proportion of these customers did this and the CMI funds were accordingly deposited with NIB. NIB sought this business in the interests of its deposit base. NIB paid CMI interest on these accounts, which provided a return to the policy holder in accordance with their contract with CMI. The attractions of this strategy are the security of the capital invested while generating a return, accessibility for encashment purposes, the provision of death benefit and the ability of the policy holder to defer tax liabilities which might accrue on investments made within the policy until such time as the policy is surrendered wholly or in part or on death. The policy is a legitimate financial instrument and is similar to other products available in the market.
In 1994, the bank's management identified certain shortcomings in the bank's selling and administration of the product. Action designed to deal with these matters was taken, which included moving the deposits from the branches where they had been based, to a central location.
NIB wishes to make it clear that it does not have, and never has had, a sales team which has been focused on colluding with customers in evading tax. This is something that NIB, as a compliant financial institution, could not condone or engage in. To date, no evidence has been uncovered by the bank or made available to it that would substantiate this claim. Neither is there any evidence that a concerted campaign was engaged in to identify specific types of customers for the purposes of tax evasion.
The present investigation has identified some further shortcomings which were not in accordance with the policies of, and fall short of, the standards expected by the NAB Group. Furthermore, the investigation team is making enquiries to establish whether any authorisations were required and, if so, were obtained to enable this product to be marketed in Ireland. The investigation is ongoing.
In retrospect, it is clear that there were unsatisfactory aspects of NIB's management of this area of the bank. It is a matter of considerable regret to the management of NIB and its parent that this should have occurred. In view of the above the bank is restructuring its operations in this area and has discontinued the promotion and sale of CMI Personal Portfolio insurance products.
The Central Bank and the Revenue Commissioners have separately sought information from the bank in relation to the allegations made and the bank is fully co-operating with these enquiries, subject to the duty of confidentiality which it has to its customers. It is the bank's policy to fully abide by the laws and regulations laid down by the statutory bodies that regulate the industry and to operate to the highest standards.
National Irish Bank has an excellent record as a financial institution of integrity. The bank is regulated and reviewed by a variety of independent bodies:
NIB is regulated by the Central Bank of Ireland;
NIB's external auditors are KPMG Audit plc who conduct an annual audit and quarterly reviews;
NIB is a substantial and compliant taxpayer and makes all necessary returns to the Revenue authorities;
NIB is subject to regular reviews and reporting requirements by its ultimate parent company, National Australia Bank, one of the world's largest and most respected banking groups.
The bank has an excellent record of compliance with the standards set by these bodies. The management of the bank conducts its business in good faith and to high ethical standards. The scrutiny which the bank is now being subjected to has increased the determination of management to ensure that all aspects of its business are conducted to the highest standards and in accordance with best banking practice.
