Free Ship of Fools by Fintan O'Toole

or ‘adequately secured’.
    The advantages of this arrangement were considerable. The clients had access in Dublin to money that was supposedly offshore. They could make lodgements and withdrawals through Traynor even though the money was stowed in a tax haven. And because of the system of so-called ‘back-to-back loans’ (essentially clients borrowing their own money), an asset was recorded for tax purposes as a debt. Instead of having large chunks of cash, the clients could pretend that they
had in fact borrowed it. Herein lay the combined brazenness and ingenuity of the scheme. Instead of merely hiding the money from the tax authorities, Traynor’s clients could actually claim tax relief on their ‘borrowings’. There was a certain magnificence to the effrontery. It evokes the same admiration as a gangster who robs a bank and then claims compensation because his own account has been emptied.
    As a licensed bank, G&M was subject to regular inspections by the Central Bank. The 1976 inspection was carried out by three inspectors, one of whom, Adrian Byrne, subsequently became the Central Bank’s head of banking supervision, a position he still held in 2002. It seemed to these inspectors highly probable that G&M’s offshore subsidiary in the Caymans was involved in tax fraud. The deposits it held, noted Byrne, were ‘part of a scheme which was surrounded by a unique level of secrecy and which appeared to involve tax evasion’.
    Yet, in reporting on this apparent fraud, the inspectors adopted the tone of a maiden aunt who has peered through a neighbour’s window and inadvertently seen him indulging in a private and intimate pleasure. Metaphorically, they made their excuses and left. ‘The bank’, they noted, ‘is in effect offering a special service which assists persons to transfer funds, on which tax has been avoided, to offshore tax havens. The possibility of the bank abusing its position as an authorised dealer in providing this service cannot be ignored. In view of the delicate nature of these matters we did not pursue the matter further . . .’
    With an admirable fastidiousness, the inspectors broached the subject with the directors of Guinness and Mahon. The directors ‘were initially reluctant to give information about the activities of these companies to the Central Bank because it [ sic ]
feared that the information might be conveyed to the Revenue authorities’ - a concern that the inspectors clearly both understood and assuaged. They agreed that they would be shown documents relating to the deposits on condition that they would not note the names of the owners. Its inspectors having written that the bank’s abuse of its licence ‘cannot be ignored’, the Central Bank proceeded effectively to do precisely that. Beyond a desultory communication to the effect that the Central Bank was ‘somewhat concerned’ and some inconclusive meetings with Des Traynor, nothing was done to stop what the inspectors strongly suspected to be a large-scale tax scam.
    Even more helpfully, the Central Bank doctored its own internal files to minimise the nature of the Ansbacher fraud. In the report of the 1976 inspection, the phrase ‘tax evasion’ was later altered, by Byrne’s superiors, to ‘tax avoidance’. This was done again in relation to a document drawn up by Adrian Byrne two years later. A statement that ‘the fact that the bank takes such extreme precautions to keep the existence of the deposits secret from the Revenue Commissioners indicates that the bank might well be a party to a tax evasion scheme’ was altered to again replace ‘evasion’ with ‘avoidance’. In evidence to the High Court inquiry into Ansbacher, Byrne referred to this complete change of meaning, in which unlawful evasion is redefined as lawful avoidance, as ‘coding’. It might more accurately be called a deliberate