Serious problems with non-resident accounts in the bank’s Castlebar branch highlighted in an internal audit report of October 1993 did not mean there were similar problems across NIB branches, he said.
Mr Lacey denied suggestions senior management in NIB never required branch managers to explain how such accounts came about but rather asked for and secured “bland assurances” the matter would be addressed. There was a very clear follow-up system, he said.
The term “bogus” was never used in reports of NIB’s internal auditors which referred to accounts being classified as non-resident when there was no accompanying declaration form of non-residency, as required under the Finance Act 1986, or when the declaration was unsigned or not properly filled in, he said.
The audit reports also expressed concern about the use of bank branch addresses and addresses such as “London, England” or “Main Street, Swansea”.
In exchanges with Maurice Collins SC, for the Director of Corporate Enforcement, Mr Lacey denied he was relying on the fact the audit reports never used the word “bogus” or “fictitious” when referring to such accounts. Counsel said such accounts were “bogus”.
Mr Lacey understood none of the banks had a practice of paying the Revenue the DIRT (Deposit Interest Retention Tax) which should have been paid on accounts identified as incorrectly classified as non-resident.
The issue of retrospective liability for DIRT was not a factor for any of the banks until after the 1999 Dáil Public Account Committee hearings into the DIRT issue, he said.
The cross-examination of Mr Lacey, who is opposing an application by the Director of Corporate Enforcement for an order disqualifying him from involvement in the management of any company on grounds of unfitness, continues today before Mr Justice Roderick Murphy.
Yesterday, Mr Lacey rejected there was a “touching naivety” about his suggestion of an innocent explanation for the absence – in several NIB branches – of the non-residency declaration forms banks required for accounts declared exempt from DIRT.
Mr Lacey had said the fact Internal Audit Reports (IAR) of several branches noted such declaration forms were not “sighted” in the branches during the audit did not necessarily mean those forms were not available.
He said the forms may have been mislaid or misfiled. A possible explanation for an Irish address being on an account designated non-resident could be that the account holder was genuinely non-resident but had bought a property here and the branch then used that property’s address on the account, he added. He agreed he could not point to any document illustrating such a scenario.
He said the bank’s documents did not go in depth into why forms might be incorrect, but he had put in place procedures to ensure follow up action was taken when that occurred.
Asked about the IAR of the bank’s Castlebar branch in October 1993 – which rated the branch “poor” with a “risk rating of four out of five” and referred to an estimated 40% of “irregularities” in non-resident accounts – he said that branch manager was removed for lack of adherence to the bank’s procedures.
When Mr Collins suggested the Castlebar report was “not untypical” in relation to the findings concerning problems with non-resident accounts, Mr Lacey disagreed.
Mr Collins then read from a series of IARs on other branches in the 1990s which regularly referred to declaration forms for non-resident accounts not being “sighted”. Mr Lacey said follow up action would have been taken.
Counsel also referred to other documents showing substantial growth in accounts designated non-resident across various branches at various periods of Mr Lacey’s tenure. Mr Lacey said NIB’s overall business was growing at this time in various areas.
Asked about NIB’s Killarney branch having 44% of non-resident accounts in its total deposit base in 1993, Mr Lacey said Killarney was well known as a town with a very high number of non-resident accounts for reasons which had not been fully explained.