An official from the Central Bank has told the Moriarty Tribunal the bank was aware of tax evasion schemes being operated by Guinness and Mahon Bank over two decades ago. Senior Counsel for the Tribunal criticised the Central Bank for not investigating the schemes more thoroughly.

In evidence today, Mr Adrian Byrne, now banking supervisor at the Central Bank, said that there was a cloud hanging over back to back loans operated by Guinness and Mahon bank as far back as 1976. Following two inspections of Guinness and Mahon by the Central Bank, Mr Byrne agreed with a Central Bank report, which stated that considerable measures were being taken by G&M to ensure certain schemes would not become known to the Revenue. Mr Byrne accepted that, while Central Bank regulations at the time meant bank officials could not inform the revenue of such schemes, the Central Bank could have demanded the resignation of Guinness and Mahon officials if such action was needed.

The Bank failed to realise that its inspectors were not being fully informed about the offshore operations of Guinness and Mahon Bank almost 24 years ago. Following an on-site inspection of Guinness & Mahon in 1978, the Central Bank made several hard hitting recommendations about the back to back loan system operated by them. There was also an inspection in 1976. They were particularly concerned about £5m of back to back loans extended by G&M. The inspectors said that the scheme was "not in the national interest."

The Central Bank report at the time, stated that the bank was involved in tax evasion schemes, the word "evasion" in the report was crossed out and replaced by "avoidance". Inspectors could see no "logical reason" at this time for G&M 's involvement in back to back loans. It said that it was not appropriate, nor ethical, for them to participate and not advise. The Central Bank was also concerned about being placed in an embarrassing situation.

However, when inspectors met with Des Traynor, he assured them that the system would stop. The Central Bank said that they did not wish to pursue the matter in the light of these assurances. In meetings with Mr Traynor in the early 1980s, the issue was not even raised. The scheme continued with one loan spiralling to almost £7m, three years later. John Coughlan, Senior Counsel for the Tribunal, said that it should have been apparent to Central Bank Inspectors that Guinness and Mahon was not disclosing all information. An internal G&M memo from 1982 states that, when asked by the Central Bank for their Top 20 loans, the back to back loans were "intentionally omitted".

Earlier, it was revealed that a director of the Central Bank held a loan backed by an off-shore account. Solicitors for Mr KP O'Reilly-Hyland told the tribunal that their client informed the then Minister for Finance, George Colley, of this, prior to his appointment to the bank. This information played no part in the deliberations of the Board of the Central Bank on Guinness and Mahon.