Why did Ansbacher (Cayman) Ltd, which for four years resisted all attempts to force it to disclose information concerning deposits beneficially owned by Irish residents, turn around and apply to the court in the Cayman Islands for permission to do just that?
The answer is that the bank was apprehensive that if it did not have an opportunity to furnish this type of information to the inspectors appointed by the Irish High Court under the Companies Act 1990 they might conclude that Ansbacher had conducted its business in relation to its Irish clients in some unlawful or inappropriate manner. The bank wishes to be able to demonstrate to the inspectors that its dealings with Irish residents have been lawful and proper. Thus it applied to the court in Cayman for permission to outline those dealings to the inspectors including revealing the identities of the its Irish clients. The inspectors are charged with the task of investigating the nature and extent of the bank's Irish business since 1971 and identifying its Irish clients.
In principle, such disclosure of identity is possible under Cayman law with the consent of the court where the bank has a legitimate interest to protect that overrides the normal duty of confidentiality which clients are entitled to expect the bank to observe. But in the judgment of Chief Justice Smellie of the Cayman court the balance between the bank's interests and the clients' interests firmly lay with the clients, at least insofar as it was proposed that their identities should be revealed. He came to this conclusion primarily for three reasons.
First, since the bank's interest was in demonstrating to the inspectors the true nature of the business it conducted on behalf of its Irish clients, it should be able to do this by giving the inspectors information about that business without having to disclose the identity of the clients.
Secondly, the court might have been prepared to give the bank permission to disclose the identity of the clients if the inspectors could have given an assurance that the information would not be used for some further purpose beyond the functions of the inspectors (such as a prosecution for tax evasion). It is a well recognised principle of the law of many countries (including Ireland) that the courts of one country will not in general assist tax prosecutions in other countries.
Obviously, the inspectors could give no such assurance because their function is to report to the High Court and to the Minister for Enterprise, Trade and Employment (on whose petition the High Court appointed the inspectors). It seems inevitable therefore that if disclosure of client identities were made, those identities would be rapidly made public and might be used as the basis for tax prosecutions.
Thirdly, the Chief Justice noted that in Ireland it appears to be the case that there is a widespread presumption that if an Irish resident has done business with Ansbacher, that Irish resident must be guilty of tax fraud. The court quoted from various media reports of the Ansbacher affair, including statements attributed to the Taoiseach and the Minister for Finance which seem to imply a presumption of guilt by association ("Finance Minister Charlie McCreevy yesterday warned the Ansbacher account holders that they faced jail for tax evasion"). However, the court noted the absence of a single specific allegation or showing of wrongdoing against any of the Ansbacher clients. The court could not therefore divide them up into "legitimate" and "nonlegitimate" clients. The court acknowledged that disclosure of confidential information is allowed in the Cayman Islands in certain circumstances. But, the Chief Justice went on: "One principle has, however, always remained constant here as it has in all countries which share our common law heritage: the law is not premised upon any presumption of wrongdoing. There must at least be specific and provable allegations of civil liability or criminal wrongdoing against a person before confidential information about his affairs might be divulged without his consent by someone owing him a duty of confidentiality.
"It follows that this court must stand ready the more so to reject any request for disclosure which may proceed upon a presumption that the mere fact of doing business with a Cayman Islands financial institution points to some reproachable objective such as tax evasion."
He concluded therefore that the bank's legitimate interest in co-operating with the inspectors could be satisfied by permitting the bank to disclose information sufficient to establish the nature of the business Ansbacher did with the clients, short of actually identifying the clients.
If the bank feels this limited permission does not adequately enable it to explain the nature of its business with the Irish clients to the inspectors, it can, I understand, appeal to the Court of Appeal of the Bahamas and from there, if necessary, to the Judicial Committee of the Privy Council in London (essentially the judicial House of Lords wearing another hat). But whether the bank thinks that particular game is worth the candle remains to be seen.
Michael M Collins is a senior counsel and was co-counsel to the McCracken tribunal which uncovered the Ansbacher deposits in 1987.
The text of the Cayman court judgement can be read at www.ireland.com
