AIB suspends top official as overcharging crisis deepens

THE AIB overcharging scandal deepened last night after it emerged the bank suspended a senior official on full pay.

The official, who is not a member of the AIB board, was suspended pending the outcome of an independent investigation into the overcharging of customers.

The bank also lodged E25 million in an account with the Central Bank to cover repayments. However, this figure may have to be revised upwards after an extensive trawl of foreign exchange dealings by the bank’s own audit staff and a team of investigators from the Irish Financial Services Regulatory Authority (IFSRA).

The head of the IFSRA Liam O’Reilly, said good progress had been made in identifying those who were overcharged.

He said they had tracked down two thirds of customers who were affected and that these people accounted for 80% of the money owed.

“Every effort will be made to ensure that, where they can be identified, those customers will be fully recompensed by AIB,” Mr O’Reilly said.

But customers who were affected will not be reimbursed until August as the bank said the process to repay the money will not be in place until then.

A spokesman for AIB would not say how many individuals had been overcharged or if the figure owed could get any higher.

Investigators from IFSRA moved in on the bank last Thursday following a tip-off from an AIB employee that some customers were being charged up to 0.5% more on non-cash foreign exchange transactions for the past eight years.

Mr O’Reilly said yesterday that the overcharging may go back even further than 1996.

AIB chairman Dermot Gleeson again apologised to customers for the error and said the bank would begin its own independent inquiry to find out how the mistake happened and went unnoticed for so long.

Two years ago, the bank was rocked by the Allfirst scandal, when it emerged John Rusnak, a trader at the AIB US subsidiary, had racked up losses of $691m.

The affair drew comparisons with the demise of Barings Bank at the hands of rogue trader Mr Nick Leeson. The Allfirst saga was not the first time Ireland’s largest financial institution has had to engage in crisis management.

In 1985, AIB was forced to go to the Government for a bail-out when Insurance Corporation of Ireland, a wholly owned division, went under with liabilities estimated at up to £120m.

After the Dáil Public Accounts Committee (PAC) launched an investigation into DIRT tax evasion in the 1980s and 1990s, which uncovered evasion through non-resident accounts across the financial system, AIB consequently made a £90 million settlement with the Revenue following a hearing. The payment was the largest tax settlement since the State’s foundation.

When this latest scandal broke, AIB’s share price outperformed its peers on the Dublin market.