THE REGULATORS: Failures by the Central Bank meant the Ansbacher scheme went undetected for years, the inspectors said.
This was despite the fact that officials in the Bank had expressed concern in 1976 about the loan-book of Guinness & Mahon Cayman Trust, the predecessor of Ansbacher (Cayman). The existence of the wider secretive scheme did not emerge for another 21 years, when it was uncovered by the McCracken tribunal.
The report said the bank's failure to test, appraise and gather information "available to it" resulted in the true nature of the activities going undetected for longer than ought to have been the case.
The bank had reservations at all times about the loan-book, but took at face value assurances by the scheme's mastermind, the late Mr Des Traynor, that the amount of loans extended to Irish residents was being run down. Meanwhile, however, the Bank was given information indicating that new loans were being granted and new deposits received.
Evidence also suggested the bank was prepared to take a "more relaxed view" in circumstances where loans involved non-residents, even when the lending institution was subject to supervision by the bank.
It is the second highly critical evaluation in recent years of the Bank's performance up to the 1990s. An inquiry in 1999 by the Dáil Public Accounts Committee into DIRT evasion said it had "an insufficient concern" with ethics and supervision when dealing with abuse of that tax.
The Ansbacher report said the Central Bank missed opportunities to detect the deposit scheme, despite repeated concerns by the regulatory inspectors who made biannual reports on Ansbacher and noted its affairs were "surrounded by a unique level of secrecy".
Of an examination in 1976 by an official, Mr Adrian Byrne, the report said the inspectors were told that the concerns of Guinness & Mahon to ensure secrecy and to ensure that the Revenue did not receive information was "completely out of the ordinary".
They said: "Neither before nor since then had he encountered such a level of concern on the part of any other financial institution."
References by Mr Byrne in his 1976 report to "tax evasion", an illegal activity, were altered to refer to "tax avoidance", which is legal. Solicitors for the bank told the inspectors that the official who made the change had no recollection of it.
A report two years later revealed the existence of loans to a Central Bank director, Mr Ken O'Reilly-Hyland, backed by a deposit in Cayman. "There is considerable uncertainty as to what if any steps were taken upon receipt of this information," the report said. There was, however, nothing to indicate that the stance adopted by the bank's management was in any way influenced by Mr O'Reilly-Hyland's situation.
The bank was persuaded against taking action in relation to Ansbacher's back-to-back loan structure, not by any suggestion that they were wholly innocent, but by a representation from Mr Traynor that their volume would decrease. Said the report: "It was unwise and regrettable for the Bank to have accepted Mr Traynor's representations, particularly in circumstances where the Bank already harboured reservations about his protestations of innocence regarding the back-to-back deposits. Furthermore, there was information available to the Bank which on any reasonable analysis demonstrated that Mr Traynor's representations were inaccurate."
The Tánaiste, Ms Harney, said on radio that the Central Bank was not alone in its failures.
She said: "It seems extraordinary that we lived in a time where the culture, even amongst State organisations, was one of 'let's pretend we don't know' because clearly in some cases where organisations knew or should have known they seemed to take the view that they didn't want to know."
