National Irish Bank has some difficult questions to answer in relation to the money it directed to Clerical Medical International in the Isle of Man. The bank is to co-operate fully with the Revenue Commissioners in its examination of the accounts and its parent - National Australia - is to conduct its own internal investigation.
At issue is the extent to which the bank was encouraging its customers to evade tax by the unusual arrangement entered into with Clerical Medical International (CMI).
The scheme has been marketed by NIB since the early 1990s. It involves depositors taking out a life assurance-linked policy with CMI. The bulk of the National Irish depositors opted to use this product to open what was effectively another deposit account with CMI in the Isle of Man. It was up to the customer to specify where this money went but most - encouraged by NIB - opted for their funds to be returned to National Irish Bank deposits. In this way NIB earned a generous commission from CMI. It also held on to most of its deposit base and protected its own balance sheet as the bulk of the money deposited with CMI returned to NIB. The money was held by CMI in NIB accounts in CMI's name, with separate numbered accounts for each customers deposit. The depositor had to go back to the Isle of man company to gain access to his or her funds. CMI disagreed with early indications from NIB that the arrangement by which they returned funds to Ireland was reached between the two companies. Last night NIB agreed that it was a question for the depositors where the money went.
Settling tax liabilities is a matter for each individual depositor, who would have received the interest payments gross - in other words free of tax - from CMI. But NIB's role is also being questioned.
It appears that at least some of the money which moved into the Clerical Medical accounts came from deposits previously held in nonresident accounts in the bank. Nonresident accounts were widely used to hide money from the Revenue Commissioners, often being held by people who were, in fact, resident in the State.
The Revenue started to tighten up on their use in the early 1990s. Some of the NIB depositors appear to have used the Clerical Medical accounts as an alternative way to hold funds out of the eyes of the Revenue Commissioners and RTE reported that they were actively marketed to a group of NIB depositors around 1994.
There is understood to have been a total of more than 200 NIB depositors holding CMI funds around 1994. At the moment there are some 60 to 70 account holders with some £23 million in total in the accounts, illustrating that they are marketed very much at the better off. Now the Revenue will be probing these deposits, while the question for NIB will be the way it marketed the schemes.
