Chairman of the Financial Services Regulatory Authority, Jim Farrell, said before his office was established the Central Bank had policed the banking sector.
He said AIB and Goodbody put in place a range of measures to trade in their own shares. But they told the Central Bank and the Irish Stock Exchange more acceptable deals were taking place.
In a lengthy letter disputing allegations made by AIB’s former internal auditor Eugene McErlean, Mr Farrell said the Central Bank had fulfilled its obligations. This included reporting AIB and Goodbody to the Gardaí on suspicion of money laundering.
Mr Farrell said on October 19, 2001, AIB Group handed over an internal investigation on Goodbody’s deals.
The scheme involved AIB’s own company, Goodbody, shuffling share deals through a business in the tax haven Caribbean island of Nevis.
The Central Bank met senior personnel from AIB at the time. This resulted in “significant” changes to the personnel running Goodbody.
The scheme had been stopped but the Central Bank said it still passed its suspicions to the Gardaí.
“The procedure at the time, [under] the provisions of the Criminal Justice Act 1994, was for suspicions of money laundering identified to be reported to the Gardaí.
“Having reviewed the relevant files we can confirm that all reporting obligations were met,” it said.
Last night the Financial Regulator could not indicate if it or the Central Bank were interviewed by investigators afterwards. Last Tuesday, Mr McErlean told the Oireachtas committee on economic and regulatory affairs he had warned authorities about the scheme.
He said whenever clients of Goodbody asked to buy shares in AIB the trade was channelled through the company in Nevis.
Mr Farrell’s letter, sent to the chairman of the committee yesterday, said the AIB/Goodbody deals were not allowed under the law at the time. This was changed in August 2001. The regulator also addressed overcharging by AIB.
The regulator said it, the Central Bank and the Office of the Director of Consumer Affairs had taken on board all cases of overcharging and had secured e255,000 in refunds.
Mr McErlean had said officials buried the overcharging issue.
Last night, AIB said it had nothing to add to its Tuesday statement and all matters were fully addressed.