AIB’s stockbrokers breached money laundering rules but did not break the law by share deals using firms based in offshore tax havens, it was claimed today.
Outgoing CEO Eugene Sheehy, said the firm’s subsidiary Goodbody Stockbrokers later notified the Central Bank and the Irish Stock Exchange about the practices when they were discovered.
The Economic Regulatory Affairs Committee heard claims in March that Goodbody traded in the bank’s own shares using companies registered in Nevis Island in the Caribbean and Vanuatu Island in the Pacific, during 2000 and 2001.
However, Mr Sheehy, who is due to step down from his position soon, insisted Goodbody was not directly trading on AIB shares but was conducting trades for clients.
Eugene McErlean, who was AIB’s internal auditor from 1997-2002, said he believed the practice was illegal and that he had informed the Financial Regulator at the time.
However Mr Sheehy told the committee today that Goodbody’s lawyers found the share deals were “unlikely” to be in breach of company law.
He added: “A legal opinion was also sought relating to compliance with anti-money laundering legislation.
“It concluded that, while no offence arose under legislation, Goodbody failed to observe the requirements of the Money Laundering Guidelines for Stockbrokers in a number of respects.”
A ’suspicious transaction report’ on the issue was also sent to gardaí, Mr Sheehy told the committee.
The CEO said unsatisfactory control procedures in Goodbody were improved and a senior management executive later left the firm over the scandal.
Mr Sheehy also pointed out that Mr McErlean was not dismissed by AIB but had claimed constructive dismissal from the bank following a report into rogue trading involving John Rusnak at its US subsidiary, Allfirst.
“Eugene McErlean was not in any way culpable for the non-detection of that fraud and the AIB did not intend to imply that he was,” the CEO added.