Funds held untouched in bank accounts and life assurance policies for 15 years will be deemed to be dormant under legislation proposed by the Minister for Finance. The money will be eligible for seizure by the State to be redistributed for charitable and community purposes.

Mr McCreevy's new legislation, to be published in the next couple of months, is expected to affect around £140 million (€180 million) held in accounts and life policies. The new scheme, which will affect dormant accounts at financial institutions including banks, building societies, insurance companies and the Post Office Savings Bank, comes into operation on April 1st, 2001.

Prize Bonds are not affected and consultation has yet to begin with the Credit Union movement in relation to arrangements it should make to handle dormant accounts.

Financial institutions will be obliged to pass over any dormant accounts to the State after the first year of the scheme on April 1st 2003. After that, dormant accounts will be handed over to the State on the April 1st each year. Mr McCreevy yesterday stressed that strenuous attempts would be made to re-unite the account holders with their funds. "The underlying objective of the legislation is to ensure that funds in dormant accounts are returned to their rightful owners," he said.

The new legislation is being introduced in response to the findings of the Dail Committee of Public Accounts report into DIRT evasion. Reacting to the announcement yesterday, PAC chairman, Mr Jim Mitchell, said he welcomed the development but would like to see the 15-year period reduced to 10 years or seven years over time.

The Irish Bankers' Federation said it fully supported the concept of restoring the link between customers and their accounts. A spokesman stressed that financial institutions had always made strenuous efforts to track down the owners of moribund bank accounts.

Mr Mike Kemp, chief executive of the Irish Insurance Federation, cautioned that a lot of details needed to be teased out in relation to life assurance policies, which may be affected. "There needs to be a separate definition in the legislation for dormant life policies and as to whether open-ended policies may be affected," Mr Kemp said.

The legislation requires financial institutions to take all reasonable steps to identify the beneficial owners of such accounts with a view to repaying the funds to them.

"It is only where the owners cannot be traced that the funds will be taken into the care of the State, with a right being guaranteed to the beneficial owners of those funds to seek a refund at any point in the future," according to Mr McCreevy.

When the funds are passed on to the State, a board of trustees appointed by the Government will be charged with disbursing these monies for charitable and community projects. The funds will be managed by the National Treasury Management Agency on behalf of the trustees.