Allied Irish Bank admits executives broke tax law

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The Independent Online

Allied Irish Banks, the scandal prone lender, yesterday admitted it had discovered five former senior executives had been carrying out covert trading activities that broke tax law.

Allied Irish Banks, the scandal prone lender, yesterday admitted it had discovered five former senior executives had been carrying out covert trading activities that broke tax law.

The group had set up a British Virgin Islands-registered company, called Faldor. It held 750,000 euros (£500,000) with the funds being managed by the bank's asset management arm AIB Investment Managers. The group appears to have made 48,000 euros out of the arrangement, AIB said in a statement. It added that "appropriate disciplinary action" was being taken.

While the scale of the possible fraud is small, it is the latest example of wrongdoing at AIB. The Irish bank was left reeling two years ago when John Rusnak, a trader at its US business Allfirst, hid trading losses of $691m (£380m). The business has since been sold.

In the past few weeks, AIB also admitted it overcharged customers on foreign exchange trades, and possibly on mortgages and trusts the bank set up to look after the estates of deceased customers.

Dermot Gleeson, chairman of AIB, said he received news of the latest misdeeds with "dismay". "A number of the practices disclosed were completely unacceptable. I am resolved to insist upon high standards of probity and compliance throughout the organisation," he said.

AIB is carrying out an internal review into its problems under Laurie McDonnell, the former auditor general of Ireland. The review is expected to be concluded in mid June.

Mr McDonnell's findings could lead to a wide-ranging spreading of blame within AIB, and it is possible that a number of senior heads will have to roll to take responsibility for the bank's control failures.

However, many of the problems that have come to light now date back to the early 1970s. The questionable practices at Faldor happened between 1989 and 1996. AIB has known about the offshore company since last August, but decided to make a public statement about it now in order to have full disclosure about wrongdoing in the past.

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