Allied Irish Banks investigates itself

The latest in a long line of scandals involving Allied Irish Banks was reported by the Irish Times as earlier this week.

It emerged yesterday that AIB has been investigating new claims that AIB deliberately and repeatedly overcharged foreign exchange customers in its branches during the 1980s and the 1990s

Those unfamiliar with how things are done in the Banana Republic of Ireland may be surprised to learn that AIB, the largest financial institution in the country, is allowed to investigate itself with very little interference from the State. The full situation, however, is even more bizarre. The Sunday Business Post, who broke the story relates how AIB compliance officers from its business ethics unit grilled several staff members for hours.

The methods used by this unit are what one would expect in a… well, in a banana republic.
Those grilled were given no legal or union representation, warned (threatened?) about possible future consequences arising from the matter, sworn to secrecy and pressurised into informing on their colleagues.

It should be kept in mind that the Gardai, (the official state police force) have no involvement whatsoever in this matter. The Financial Regulator seems to play only a peripheral role in so far as AIB keeps the body informed of its activities. Indeed, a spokeswoman for the regulator said that its main priority in any investigation is (merely) to identify the customers involved. (My italics)

It is also likely that AIB will be permitted to act as judge and jury on staff members based on the results of its investigation. Last year, after a similar scandal, AIB handed down ‘punishment’ on several staff members for their misdeeds. One man, however, had the temerity to challenge his ‘sentence’ and took AIB to a ‘real’ court. He won his case and claimed he was very happy with the outcome. AIB, however, insisted that no special deal was done. Who do we believe? Was he paid off or did he suddenly realise that AIB was really only concerned with his best interests? The Financial Regulator, of course, had no comment to make.

To give a better perspective on how things are done in the Banana Republic of Ireland it can be useful to make comparisons with how other jurisdictions handle these cases. At the moment a case not unlike the AIB matter is under way in Australia. So far, two men have been sentenced, one to 16 months and the other to two and a half years in jail.

In real democracies, when white collar crime is detected, the following procedures usually ensue – Police investigation, arrests and trial if enough evidence is found, appropriate punishment including jail sentences for the guilty. In the Banana Republic of Ireland?… Ah,sure, you know yourself!

Toothless IFSRA

During the 80s and 90s, Irish banks and other financial institutions robbed tens of millions from the State through DIRT, Ansbacher and other frauds. During this time the Dept. of Finance, various Ministers for Finance, the Central Bank and the Revenue Commissioners all knew about this theft but took no effective action.

When it all eventually came to light, the most common excuse was: “we were afraid that any action would lead to a flight of capital out of the country’. Since then, hundreds of millions have been spent investigating this corruption in never-ending tribunals, all paid for by the taxpayer. One would imagine that after all this; the so-called State regulatory bodies would have got their act together and financial institutions would be more than willing to co-operate in cleaning up their business.

Not so, apparently. The so-called Irish Financial Services Regulatory Authority (IFSRA) has timidly proposed some modest regulations to test the integrity and competence of senior personnel in the banking industry. The arrogant response by various financial institutions demonstrates that they have no fear of the Financial Regulator and are determined to maintain the freedom that almost total self-regulation affords them.

Some of the objections to the modest proposals include: Unduly burdensome, deterrent to recruitment of personnel, overly bureaucratic or damaging to Ireland’s attractiveness as a base for international financial services and, yes, you’ve guessed it, fear of a flight of capital from the country. So, what is involved in this proposed oppressive and despotic regime? Well, just three requirements:

1. Directors will have to disclose that they are tax compliant and provide a tax clearance certificate every year.
2. A person would be unsuitable as a director if they had dealings with a tribunal of inquiry
3. A director would have his/her suitability examined if they failed to manage finances.

Now the banking industry is constantly reminding us of how important they are, how crucial their industry is to the financial health of the country. The employment of thousands, financing of industry, provision of mortgages, they have even claimed that they created the Celtic Tiger. So what is the problem with meeting a few modest and reasonable conditions in order to qualify to work in an industry that is apparently of such crucial importance to the future of this great little nation?

The problem is of course, accountability. Our bankers are not used to answering to anyone other than themselves. On a practical level, there is no problem meeting the above requirements but on a psychological level, it is an impossibility. The very idea that the great and good of our banking sector would have to submit to regulation, no matter how minimal, is, for them, simply outrageous and unacceptable.

So, how will this be resolved? Well, judging by how things have always operated in the Banana Republic of Ireland, the following is likely. A deal will be struck that will save face for both parties. The so-called Financial Regulator will issue yet another glossy pamphlet trumpeting how it is protecting the interests of the consumer and the banks will continue to do what they do best, make massive profits within their own self-governing financial republic where they are untouchable.

Guess who loses out?