Ship of Fools by Fintan O'Toole

Bank’s own weakkneed compromise with Traynor. Instead of closing down his operation and calling in the police, it merely extracted from him an informal agreement that the Ansbacher racket would
be kept at its current levels. Even when it discovered in 1982 that the Ansbacher deposits were in fact increasing significantly, the Bank did nothing.
    As the Moriarty tribunal concluded, ‘despite increases in the level of lending, references to substantial new loans being backed by deposits, and other matters which might reasonably have induced the Central Bank to wonder as to . . . the value of Mr Traynor’s assurances, few if any further inquiries were made. Indeed it seems that the interest on the part of the Central Bank in the off-shore activities that had been foremost in its concerns when reporting in 1978 thereafter dwindled and largely ground to a halt.’
    This may or may not have been connected to something else the Central Bank discovered in 1982. In December of that year its exchange controls division received a formal request from a man who wanted to take out a foreign currency loan to the tune of UK£350,000. The request, on behalf of Abbeyville Stud, clearly stated that the lending bank would be ‘Guinness Mahon Cayman Trust Ltd, PO box 887, Grand Cayman, British West Indies’ and that, as security, the title deeds to the stud farm would be lodged with Guinness Mahon Cayman Trust Limited. The signature on the letter was that of Charles J. Haughey. It was delivered personally by Des Traynor to the general manager of the Central Bank. Approval was issued the following day, a response time that may say more about the source of the request than about the bank’s efficiency.
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    It is striking that the Central Bank’s scrutiny of G&M, never very acute, became far less inquisitive after Haughey - who was using the bank to hide much of his wealth - came to power. At a review meeting in April 1981, there was, as the
High Court inspectors’ report puts it, ‘some passing reference to particular loans with a Cayman connection’ but ‘no further discussion of the overall nature of this banking activity or of its taxation implications’. The Central Bank conducted further examinations of G&M in 1986, 1988 and 1992 and failed every time to blow the whistle on what was now a large-scale criminal conspiracy involving the country’s most senior politician.
    The regulators of the financial system never got to the bottom of Traynor’s system, and never worked out the precise mechanism of his ‘back-to-back’ loans. But this was in part because the Central Bank failed to use its powers to compel the full disclosure of Traynor’s records. In hindsight, Adrian Byrne acknowledged, as the Moriarty report put it, ‘that he and his colleagues should probably have pressed Mr Traynor harder on access to documents, but nonetheless this was a substantial person in the banking community whom they had trusted; whilst there were strong suspicions, and some like himself had believed that evasion was involved, it was another thing to prove this. Put by Tribunal Counsel that all that was needed was good reason [to demand the full records], and that this did exist, Mr Byrne responded that he did not disagree and that this was an option, but they had taken the course of accepting that the loans in question would be run down . . . Although there were some isolated indications of reductions in loans, Mr Byrne agreed that there had been no reduction overall, and that some increases in loans had been very marked, and this should have produced more action on the part of the Central Bank. He was in no doubt that untruthful information had been forthcoming from Mr Traynor. The matter should not have been dropped after the priority that had been given to it in the earlier inspections.’

    A last opportunity to launch a full investigation into Traynor’s scheme arose in 1988