AIB has begun disciplinary procedures against three executives working at the bank who were found to have tax liabilities on funds of up to €48,000.
The action was sanctioned by AIB's board last week. A spokeswoman refused to make any further comment on the process. In a statement yesterday, AIB chairman Mr Dermot Gleeson said he would insist upon "high standards of probity and compliance throughout the organisation".
The seven other former executives identified in the bank's investigations into tax affairs and the treatment of investment clients may not face any sanction from the bank, but are expected to come under scrutiny from the Revenue Commissioners and other regulatory authorities. The bank refused to comment on whether it would be taking legal action against them and also declined to name them.
The five senior executives were the beneficiaries of a British Virgin Island investment company, Faldor Limited, managed by AIB Investment Managers, and are understood to have been more senior than those who are now facing disciplinary action.
The relationship between Faldor and AIBIM was brought to the attention of the head of AIB's investment arm, Dr Eileen Fitzpatrick, in September 2003. She notified senior management.
AIB immediately informed the Irish Financial Services Regulatory Authority of the issue and began its own investigation. According to its statement, the bank endeavoured to ascertain all the facts surrounding the relationship between AIBIM, Faldor and the former senior executives, including internal control issues.
IFSRA requested that the bank should also examine whether there were other offshore investment vehicles being used by senior executives, whether any current or former senior executives at AIB had offshore accounts and whether tax issues arose.
The investigation considered whether any of AIBIM's customers had been disadvantaged by the inappropriate deal-allocation practices identified. It also examined the group's procedures in how it allocated shares in companies coming to the stock market to senior AIB executives.
It found one transaction involving shares in a flotation offer which wasassociated with Faldor.
A follow-up investigation by former Central Bank governor Mr Maurice O'Connell for IFSRA found that good deal-allocation practices and standards had been in place in AIBIM since 1997.
However, it also identified that between 1991 and 1993 two clients could have been disadvantaged to the tune of €174,000 through inappropriate deal-allocation practice. The bank is to pay them €156,000 in interest on top of this initial sum - a total of €330,000. This inquiry also established that AIB had a tax liability of €800,000 arising out of these practices.
Yesterday, AIB chief executive Mr Michael Buckley said the leadership behaviours he expected of senior management were clear. "I am determined they will be maintained and validated through a regular accountability process."
