Dublin, 23 February 2021
Transparency International (TI) Ireland has published a report today highlighting the risk that the proceeds of international corruption are being laundered through Irish-based financial services and companies. The report titled ‘‘Safe Haven?’ Targeting the Proceeds of Foreign Corruption in Ireland’ comes on foot of a number of recent cases involving the laundering of bribes and embezzled state assets through funds managed in Irish-based banks and insurance firms.
The report examines the extent to which Ireland is prepared to detect, freeze and repatriate the proceeds of overseas corruption laundered through the Irish economy, in particular by senior public officials, their families and associates. It also highlights cases involving former Nigerian president Sani Abacha, Thai tourism chief, Juthamas Siriwan, and Gulnara Karimova, the daughter of Uzbekistan’s former president Islam Karimov.
In 2015, Ms Karimova was convicted of fraud and money laundering arising from allegations that she benefited from US$1 billion in bribes paid as part of a competition to award a mobile phone licence in Uzbekistan. Reports suggest that between US$100 and US$300 million of corrupt payments to Karimova were laundered through funds managed by a US bank based in Dublin.
‘I think these cases are likely to represent the tip of an iceberg. The United Nations estimates that US$2.6 trillion is stolen through corruption each year. This is a sum equivalent to more than five per cent of global GDP. When you consider that Ireland is also a major player in international financial services, hosting 250 of the world’s leading financial services companies, with €2.8 trillion in net assets in funds domiciled in the country, the risk that many of these assets are the proceeds of corruption is extremely high. If even a tiny percentage of these funds are the proceeds of bribery and embezzlement, we are talking about hundreds of billions of Euros that could have been laundered through Ireland’, said John Devitt, Chief Executive of TI Ireland and editor/co-researcher on the report.
‘It appears that Ireland is ill-equipped to detect the laundering of these assets through our financial system. In all the major asset recovery cases we know of, the assets were frozen after investigations overseas led to requests from foreign authorities asking the Criminal Assets Bureau or Department of Justice to freeze these assets. None of these funds were identified in advance by the banks or insurance companies that were managing them. Notwithstanding the fact that new measures are being introduced to prevent and detect money laundering, our approach to detecting these funds has been very reactive - we’re always more than one step behind these crooks’, Mr Devitt added.
TI Ireland has welcomed many of the recommendations made in a Department of Justice-sponsored report led by former Director of Public Prosecutions, James Hamilton last year, which includes calls for greater resourcing of the Gardaí and a national strategy aimed at tackling corruption and economic crime. However, TI Ireland has also called for the establishment of a National Anti-Corruption Bureau with ring-fenced resources aimed at helping detect the proceeds of corruption through intelligence-led policing, as well as free public access to Ireland’s Register of Beneficial Ownership (RBO) and Companies Registration Office.
The ‘Safe Haven?’ report highlights risks including the use of Special Purpose Vehicles (SPVs) which include ‘Section 110 companies’ used to avoid tax on investments, as well as Ireland’s Immigrant Investor ‘Golden Visa’ Programme which allows wealthy non-EEA nationals to secure residency visas in return for at least €1 million investment in government approved schemes or a €500,000 donation to charity. In response to such concerns, the Irish Government has introduced enhanced levels of due diligence for all applications to the programme. However, such schemes have been the subject of concerns raised by the European Parliament, while the Department of Justice has noted that no applicant under the scheme has had their applications refused because of their status as a politically-exposed person since the programme was created in 2012.
In addition, TI Ireland has raised concerns about the potential use of new investment liability partnerships which do not currently have to file beneficial ownership details with the RBO. Similar structured finance mechanisms have been used to launder the proceeds of corruption and organised crime ‘on an industrial scale’, according to TI’s UK chapter and were recently used to launder US$234 billion in suspicious transactions by Danske Bank in Estonia between 2007 and 2015. In spite of this, new legislation was fast-tracked in 2019 and 2020 to allow Dublin compete with its international counterparts.
The report also notes that the Irish property market has substantially increased in value in recent years. Although there is little evidence to suggest that Dublin has become a home for the world’s oligarchs in the same way as other major capitals, the report states that ‘increasing residential and commercial property prices promise a solid short-to-medium term investment for anyone looking to launder money, and the controls around the sector leave some room for concern’, especially given the low level of anti-money laundering compliance by property service providers such as real estate agents.
The risk that Irish company formation agents, lawyers and accountants are acting as ‘gatekeepers’ or ‘professional enablers’ on behalf of organised crime groups and corrupt individuals is highlighted as well. According to the international oversight body, the Financial Action Task Force (FATF) this risk appears not to have received the attention it deserves in Ireland, with FATF calling on the Law Society and the designated accountancy bodies to ‘apply effective, proportionate and dissuasive sanctions for non-compliance with AML/CFT [anti-money laundering and counter-terrorist financing] requirements’.
Ireland has signed up to almost all of the key multilateral anti-money laundering and anti-corruption instruments at both the global and European levels. These instruments subject it to regular peer review and evaluation mechanisms such as the FATF that aim to ensure Ireland is meeting its obligations to tackle money laundering and counter-terrorist financing. It has largely transposed five EU anti-money laundering directives into Irish law, while a sixth EU Directive was due to be transposed by December 2020. Despite the reforms introduced and the efforts of the multiple agencies responsible for ensuring compliance with anti-money regulations and investigating breaches, international observers including FATF have questioned Ireland’s capacity to enforce existing laws.
‘None of the multitude of agencies responsible for monitoring breaches of anti-money laundering rules or investigating over 20,000 Suspicious Transaction Reports filed by Irish banks and designated professionals annually have the resources they need. Ireland is not unique here. The FinCEN files report last year showed how most authorities and financial institutions are ill-equipped to follow up on such reports leading to the belief that banks and law enforcement agencies are not doing much more than ticking boxes. It also pointed to the role that Irish intermediaries are playing in enabling corrupt officials and organised crime.
The report also deals with the mechanisms by which the proceeds of corruption is seized and repatriated to the victim country by the Irish authorities.
‘We have been unable to find out much about the Gulnara Karimova case, other than what’s been reported in the media. But it’s essential that if and when this money is repatriated to Uzbekistan that it is subject to international best practice for the responsible repatriation of these assets, including independent oversight by civil society and adequate anti-corruption safeguards. It would be important to learn from previous cases involving repatriation where money has been unaccounted for and strengthen anti-corruption provisions in any agreement between Ireland, the US and Uzbekistan’, added Mr Devitt.
TI Ireland’s 18 recommendations to stem the tide of dirty money into the country, include the development of a national strategy against corruption and related money laundering offences; the establishment of a unified National Anti-Corruption Bureau and anti-money laundering supervisory authority for Designated Non-Financial Businesses and Professions (DNFBPs); as well as the prohibition of continued sale of dormant shelf companies in Ireland; and the requirement that legal persons acting as beneficiaries of life insurance policies become a heightened risk factor for relevant firms’ anti-money risk assessments. In the meantime, TI Ireland has called for additional resourcing of Ireland’s law enforcement and regulatory agencies including the Garda National Economic Crime Bureau.
‘The stakes are too high to allow this problem go unaddressed. Everyone from corrupt heads of state to child traffickers and arms dealers are using international financial centres in Dublin and Singapore, or real estate in New York, London or Paris to launder the proceeds of their crimes. We will never get to grips with these and many of the world’s most pressing and intractable problems unless we stop the flow of money back to these criminals’, added Mr Devitt.
The report is available here.