The chairman of the DIRT inquiry, Mr Jim Mitchell, questioned whether the Guinness & Mahon-held Ansbacher deposits were a money-laundering operation. The funds were borrowed by Ansbacher Cayman from its customers and were apparently not liable for DIRT.
Details were given of the operation by which funds originating with Irish residents were borrowed by Ansbacher Cayman, in the Cayman Islands, and then deposited by that bank with Guinness & Mahon in Dublin.
According to Mr Roy Douglas, chairman of Irish Life and Permanent, which now owns Guinness and Mahon, Ansbacher was the owner of the accounts.
Mr Mitchell asked Mr Douglas whether it was not a classic case of laundering money. Mr Douglas, who was chief executive of Irish Permanent when it acquired Guinness and Mahon in 1994, said he thought it was a procedure to avoid paying tax on deposit interest. As the beneficial owner of the accounts, Ansbacher Cayman, with a non-resident status, would not be liable for DIRT.
Mr Mitchell said the committee hoped to clarify the status of the Ansbacher accounts.
Earlier, Mr Douglas agreed with Mr Sean Ardagh that the advertising of non-resident accounts in the branches of all building societies had contributed to the problem of bogus non-resident accounts. He said Irish Permanent's non-resident book was emigrant-based, with an average £6,000 deposit.
Mr Ardagh said the decision "to literally wallpaper" branches with advertising was difficult to understand.
Irish Life and Permanent is currently in negotiations with the Revenue Commissioners over the DIRT liability of the Ansbacher accounts, which amounted to £38 million in 1989.
The Commissioners have told Irish Life and Permanent "Irish resident persons were, in fact, beneficially entitled to interest on the deposits whether in Irish or foreign currencies and that there appears to have been an awareness of this within the bank."
Mr Douglas said that £52,000 paid to the Revenue had been accepted as an interim payment in respect of the liability of eight accounts, denominated in Irish pounds, and for which a section 37 certificate was not available.
"That matter is the subject of ongoing discussions with the Revenue and the Revenue have indicated that they are going to do an audit of the group in relation to declarations."
Mr Douglas denied that the Ansbacher procedure was "a fairly extraordinary legal construct," as described by Mr Pat Rabbitte.
It was "the simple straightforward set of relationships that exist between a depositor and a bank," Mr Douglas said.
The two sets of relationships - that between the lenders and Ansbacher Cayman and between Ansbacher and Guinness and Mahon - were unconnected in law although the amounts involved equated with each other.
The acting chief executive of Guinness and Mahon, Mr Brian McConnell, said he had not come across the procedure before and insofar as it was a "relationship between bank A and bank B", there was no DIRT payable.