Mr Des Traynor's Cayman Islands banking operation was used to facilitate money laundering by a convicted drugs smuggler in the US, the tribunal was told yesterday.
Fernando Pruna, from Miami, Florida, who was imprisoned for his role in organised criminal activities, received loans in excess of $1 million from Guinness Mahon Cayman Trust between 1985 and 1988.
Mr John Coughlan SC, for the tribunal, said it was not suggesting Mr Traynor, or his co-directors in the offshore operation, Mr John Furze and Mr John A. Collins, "were involved themselves in the drug trade or assisting the drug trade". Rather, he said, "the tribunal is interested in the irregular and unorthodox banking methods used by them which facilitated this particular type of activity to allow money be effectively laundered."
In a separate development, the tribunal was shown correspondence between Mr Traynor and Mr Collins in which the two expressed fears that a clampdown on drug trafficking in the Cayman Islands might indirectly have had a negative impact on their business interests.
In a letter to Mr Traynor dated August 3rd 1984, Mr Collins referred to proposed legislation to be introduced in the Cayman Islands which would have weakened secrecy laws to give effect to an agreement between US and British governments concerning an international narcotics convention.
Mr Collins wrote: "I gather there have already been some American press headlines on the order of `Cayman Secrecy Smashed' and I suspect business to be adversely affected."
However, he said, the adverse effects "should now stop and the fact that we are the first haven to conclude an agreement may enhance our reputation as a keen island for reputable business. If it works I would anticipate the agreement being extended to other criminal activities but not tax evasion."
Mr Coughlan said the letter seemed to show a particular concern on the part of Mr Collins that the reach of the agreement should not extend to tax evasion, "from which it seems reasonable to conclude that Mr Collins envisaged attracting funds from that particular market.
"His apprehension that customers seeking to evade tax might be deterred from using the island was shared by Mr Traynor," Mr Coughlan added.
This was illustrated by a letter written to Mr Collins, in which Mr Traynor said the developments "have given us no option but to adopt a cautious approach in our revised revenue forecasts for the current financial year."
In relation to Pruna, the tribunal heard that he and his wife were introduced to Guinness & Mahon Dublin by Guinness & Mahon Cayman Trust and loans were made available to him and a company controlled by him.
Mr Coughlan said it appeared the bank encountered significant difficulties in securing interest payments on the loan and, ultimately, it took further security over a property in Florida, the title of which appeared to have been transferred into the name of Mars Nominees Ltd, the Guinness & Mahon nominee holding company.
The $700,000 balance on this loan was discharged in June 1988, following which the property remained registered in the name of Mars Nominees.
