Office of the Comptroller and Auditor General - Dirt Investigation - Chapter 20

Chapter 20 : Barclays Bank plc

Background

The material in this chapter refers to the Dublin office of Barclays Bank plc (UK).

Non-Resident Deposit Levels

The bank's share of the non-resident deposit market as at 30 November 1998 was 3%.

The value of its non-resident book varied between ?6m and ?292m during the period 1986-98. The vast majority of these accounts are non-resident corporate deposits.

Key statistics in relation to non-resident accounts are as follows

Year

Number of Non-Resident

Accountsa

Percentage of Deposit

Book by Valueb

1998

1997

1996

1,613

1,255

1,012

42.6%

55.3%

44.0%

a Information supplied by the bank

b Calculated using Central Bank data.

Staff Instructions and Procedures

The bank's current procedures for opening accounts involves the completion of an aide memoire which was recently amended to tighten up internal procedures. Staff involved in opening non-resident accounts use it to

capture all the relevant information about any new offshore account including the receipt of a non-resident declaration and proof of identity

act as an aid for relevant staff to ensure the bank receives consistent relevant documentation and information from its customers.

Accounts are only considered live when the aide memoire has been signed off by a Relationship Manager or Corporate Banking Director in the case of non-resident accounts.

The bank informed me that its procedures have significantly evolved over the last number of years to their present position. Non-resident accounts have only been a feature of the bank’s business since 1992-93 and while procedures at that time were consistent with the Group’s requirements, they have been greatly improved upon since then.

I was informed in oral evidence that the bank did not obtain all non-resident declarations over the relevant period as the requirement may have received less priority than other internal procedural issues such as risk assessment. Confusion over a Revenue concession in relation to short term deposits was a contributing factor.

The bank informed me that it did not hold the required declarations for all other DIRT exempt accounts.

The bank did not seek a Form F during the period 1986 to 1993 and neither did it seek an affidavit in order to satisfy itself about the authenticity of any claim for non-resident status or in any case where a resident was opening a non-resident account for the beneficial ownership of a non-resident.

Internal Management Review

Internal Audit

The bank informed me that besides any review which the business in Dublin may undertake from time to time the internal audit process of the bank, which takes place every two years, would operate through the main Barclays Bank Group mechanism to independently review its processes in relation to account opening documentation. These reviews, especially the most recent ones, look at whether or not it complies with the Group’s laid down procedures on account opening. This check involves investigating a designated number of accounts and the relevant documentation associated with them.

Internal Audit Results

The bank informed me that the reviews by its external inspection teams did not highlight any abuse in the bank necessitating any additional tax payments to Revenue.

The last audit undertaken was in October 1998 which recommended that a full review of the bank's "know your customer" controls should be undertaken. This has been completed. The report also requested the bank to tighten up on its aide memoire documentation which the bank uses to ensure correct documentation is obtained when establishing a relationship. The bank informed me in oral evidence that these findings related more to a lack of evidence of checking rather than a lack of checking itself. This report was, in accordance with normal procedures, circulated to senior executives of the Barclays Bank Group in London.

External Review

Central Bank Review

The Bank informed me that no matters were raised in regard to its administration of non-resident accounts by the Central Bank of Ireland.

External Audit Review

Any external audits are undertaken as part of the audit of Barclays Bank plc (UK). No issues came to my notice in relation to non-resident accounts.

Administration of the Taxes Acts

Revenue Inspection of Declarations

Revenue originally examined non-resident declarations in the bank on 2 March 1999. Due to difficulties in establishing the number of non-resident accounts a second meeting was held in the bank on 19 March 1999. At this meeting the bank supplied the Revenue officials with a listing of all non-bank non-resident accounts in existence at 15 March 1999. Based on this listing and non-resident declarations supplied to them, the Revenue officials calculated that the bank had a total of 70 non-resident declarations in respect of 301 non-resident customers who had a total of 353 accounts .

At the meeting on 2 March 1999 the bank had stated that they had a large number of customers with "call deposit" accounts and they believed that it was not necessary to get non-resident declarations from them as Revenue had given a concession to the IBF in 1995 which covered those cases.

The Revenue officials advised the bank that they did not believe the bank was entitled to use the concession in this way. They stated that as far as they understood the situation

the concession was defined as being for deposits of up to 3 months duration and, therefore, accounts which were in existence for longer than 3 months did not qualify for the concession irrespective of the nature of the deposit account in question and

that the purpose of the concession given by Revenue was to facilitate banks by not imposing the requirement for a declaration in cases where a bank was dealing with a customer for a very short time-scale.

According to Revenue, Barclays appeared to have a largely consistent customer base over the years and their argument regarding "call deposits" did not appear to be within the letter or the spirit of the concession given by Revenue.

At the second meeting on 19 March 1999 the bank indicated that they now accepted that the non-resident customers with "call deposit" accounts were not covered by the terms of the concession granted by the Revenue Commissioners in 1995 as these accounts were, in general, open for long, indefinite periods and well beyond the three-months period specified in the 1995 letter. The bank stated that it would immediately begin the process of obtaining non-resident declaration forms from these companies.

The bank, however, did believe that the concession should apply to the companies on its list who had short-term deposits of less than three months. The bank stated that their understanding of the agreement between the IBF and the Revenue Commissioners was that such accounts are within the terms of the concession and that a continuous relationship with the customer does not alter that.

The bank stated that it would contact the IBF in order to clarify the position.

Interest Reporting

The banks returns under Section 891 of the Taxes Consolidation Act 1997 were filed in all cases. However the bank's returns were not complete as they included interest on Irish pound deposits only and the bank only included resident companies on the assumption that the bank held a non-resident declaration for all non-residents.

Investigation Branch Enquiries

Prior to the inspection of declarations in 1998 no matters came to the attention of the Investigation Branch of the Revenue which would have necessitated contact with the bank.

Result of Work Performed by the Appointed Auditor

The following are the results of the Auditors review

Tax Exemption
Documentary Compliance - Declaration of Non-Residents (Form 37)
Sample

35

No Declaration held

7

Late dated Declarations

Undated Declarations

Declaration Validity Exceptions

0

2

3

Total Declaration Exceptions

12

Percentage Exception

34%

Authenticity Risk Profile - Non-Residents
Sample

35

Risk Indicator
Irish Address

0

PO Box or ‘Care of’ Address

0

Hold Mail

0

Transaction Profile

0

Accounts with Liens

0

Other

0

Total accounts with Risk Indicators

0

Percentage Exceptions

0%

Accounts also with documentary exceptions

0

Accounts where the bank believes it holds appropriate evidence of non-residence

0

19Documentary Compliance - other Exempt Accounts and SSAs
Account Type

Exempt

SSA

Sample

55

0

No Declaration

25

0

Declaration Exceptions

14

0

Total Exceptions

39

0

Percentage Exceptions

71%

0%

Interest Reporting Exemption
Documentary Exemption (Form F)
Sample

11

No Form

11

Percentage Exception

100%

The contents of this page were last updated on 26/09/03