Former Principal Auditor ‘factually and legally wrong’ on Savings Bank compliance audit, Govt says 

The Gibraltar Government said on Wednesday that the former Principal Auditor, Anthony Sacramento, was aware he lacked the statutory power to conduct a compliance audit of the Gibraltar Savings Bank, describing his criticisms in the 2018/2019 report as factually and legally incorrect. 

It was reacting after the report claimed Chief Minister Fabian Picardo acted improperly and unconstitutionally by trying to prevent Mr Sacramento from conducting a compliance audit at the Gibraltar Savings Bank. 

Mr Sacramento had conducted a compliance audit of the Savings Bank in 2021 on formal request from the Director of the Savings Bank to test policies, controls and procedures under the Proceeds of Crime Act 2015 [POCA]. 

The former Principal Auditor submitted his report on October 2021 and found the bank met most of its POCA obligations “effectively and efficiently”, although there was scope for improvement in some areas. 

But when Mr Sacramento he sought to conduct another compliance audit earlier this year, this time under his constitutional and legislative powers as Principal Auditor, he ran into problems. 

As he prepared for the audit, Mr Sacramento was called to a meeting with the Chief Minister, the Minister responsible for the Savings Bank, the Financial Secretary and the bank’s acting Director, where he was informed by Mr Picardo that the Government had a legal opinion advising that the Principal Auditor did not have the power to undertake such an audit. 

He described it as an “unacceptable” intervention that was “improper and unconstitutional”, adding the Constitution was clear that the Principal Auditor should not be subject to the direction or control of any person or authority. 

But according to the Government, successive Financial Secretaries had advised the Chief Minister that such an audit did not fall within the Principal Auditor’s statutory remit.  

In a statement, No.6 Convent Place said the 2021 compliance audit, conducted at the invitation of the GSB, “identified that more expertise was required to carry out such an audit”. 

As a result, the GSB engaged PWC to conduct regular compliance audits under the Proceeds of Crime Act [POCA], “despite not being required to do so”. 

The Government noted that PWC, as a Big Four accountancy firm, carries out similar audits for licensed institutions and possesses the necessary qualifications and experience, “quite unlike the office of the Principal Auditor that do not carry out any such audits of any institution as part of their statutory functions”, No.6 said.  

“To have the GSB re-audited for POCA compliance by personnel in the office of the Principal Auditor, without the same experience or expertise in this field as those in a Big Four firm of accountants that carry out such audits regularly for licensed institutions, made no sense and this could give rise to a public loss of confidence in the standards of compliance by the GSB given it had already subjected itself to voluntary POCA compliance audit by PWC.” 

The Government said compliance audits of the GSB fall outside the Constitutional powers of the Principal Auditor and that rejecting the request was “not contrary to the Constitution but in full compliance and in keeping with it”.  

It claimed the former Principal Auditor had himself previously written to the former Financial Secretary acknowledging he had no power to carry out such an audit without being invited to do so. 

“It is irresponsible in the extreme that the former Principal Auditor has suggested that there is any issue with compliance in the Gibraltar Savings Bank,” Mr Picardo said. 

“He knows that the GSB has the benefit of a compliance audit by PWC who were qualified and experienced to carry out that audit that his office is not statutorily empowered to carry out.” 

“In fact, although he conveniently avoids saying so in his clearly biased report, the former Principal Auditor actually wrote to the former Financial Secretary and confirmed that he accepted that a compliance audit of the Gibraltar Savings Bank was outside of his statutory functions.” 

“It is therefore clear that, despite what the former Principal Auditor has now, unfairly and improperly, said in his biased report, he himself has previously said that he is not statutorily empowered to carry out a compliance audit of the Savings Bank, and there has therefore not been any constitutional failure on my part when I have communicated back to him his own written, previously expressed views.” 

“It appears to me that, in his angst to add criticism of me and my government to his biased report, Mr Sacramento has forgotten what he said in writing previously in relation to his lack of powers in respect of a compliance audit of the Savings Bank, in which he flatly contradicts himself.” 

“Mr Sacramento is therefore wrong to suggest I have acted unconstitutionally.” 

“In fact, it was he who was exceeding his legal authority in seeking to insist on carrying out a compliance audit which he previously specifically recognised was outside his statutory functions.” 

“Again, alongside his views as to the formal gazetting of the accounts of the Savings Bank, this part of the 2018/2019 report represents another massive failing in the facts and argumentation by the former Principal Auditor and is another nail in the coffin of the credibility of that report.” 

“Despite all of the above, I have no doubt that the former Principal Auditor agrees that the Gibraltar Savings Bank provides the safest and most competitive option for savers and that, upon his retirement, he will join the thousands of Gibraltarian pensioners and savers who deposit their money with the GSB.” 

The Government added that the Minister with responsibility for the Gibraltar Savings Bank, Sir Joe Bossano, had maintained that the Savings Bank’s accounts should be gazetted once the Principal Auditor’s report for the relevant year is published.  

The 2018/2019 accounts were therefore published last week, it added.