On International Anti-Corruption Day, Transparency International (TI) Ireland has launched a new report focusing on weaknesses in Irish corporate structures that can facilitate illicit financial flows. The report, titled ‘Weak Links: Irish Corporate Structures and Illicit Financial Flows’, draws attention to vulnerabilities within Ireland’s legal framework that may be exploited by bad actors for money laundering, corruption and other illicit activities. Drawing on analysis by experts from different backgrounds, the report highlights the urgent need for comprehensive reform to ensure Ireland’s financial system cannot be used to facilitate the flow of dirty money from other parts of the world.
Background
The ‘Weak Links’ report builds upon previous findings in TI Ireland’s 2021 ‘Safe Haven?’ report, as well as the conclusions of the International Monetary Fund’s (IMF) 2022 Anti-Money Laundering (AML) assessment of Ireland. The IMF found that, as a rapidly growing international financial centre, Ireland was facing ‘significant and increasing threats from foreign criminal proceeds’. The Fund pointed to the fact that financial sector assets had ballooned by 30% between 2017 and 2020, reaching €6.57 trillion, cross-border payments to and from Ireland had tripled over the same period, and financial flows to offshore centres had increased five-fold to 2022.
Gaps and Risks Identified
Despite undoubted progress in some areas – such as the current development of the country’s first national strategy against economic crime and corruption – the report identifies critical gaps in legislation and regulation that undermine Ireland’s ability to prevent and detect illicit financial flows.
The specific issues explored in the report are:
- Beneficial ownership transparency. Corporate lawyer Paul Egan SC explores the EU Court of Justice’s ruling on access to beneficial ownership data, critiques Ireland’s restrictive response, and calls for disclosure of such information to be a routine obligation under company law.
- Limited Partnerships. Legal expert Elspeth Berry highlights deficiencies in the law around limited partnerships, and recommends how existing reform proposals should go much further in order to lessen the attractiveness of Irish limited partnerships for illicit financial activity.
- Company registration. Journalist John Mulligan explains how he exposed the large-scale abuse of Ireland’s company registration system in 2021, examines the State’s response, and questions whether recent measures go far enough in protecting the integrity of the system.
- Special Purpose Entities (SPEs). Business academic Dr Jim Stewart provides an overview of these complex structures, including the use of so-called ‘section 110’ tax status, and how the features, scale and regulation of SPEs relate to risks to financial stability and money laundering.
A Call to Action
The report underscores a common theme: Ireland’s current corporate transparency and enforcement mechanisms are insufficient to address the scale of international money laundering risks. Accessible and accurate corporate registries, backed by well-resourced enforcement bodies, are essential to prevent financial abuses.
TI Ireland’s Head of Policy and Research, Dr Alexander Chance, said: ‘Ireland has certainly made some progress in combating economic crime, but the challenges of a globalised financial system require much more robust action by policymakers. The gaps identified in this report expose vulnerabilities that could tarnish Ireland’s reputation as a financial centre, and need to be addressed as a matter of urgency.’
The report advocates for:
- Legislative and regulatory reform. Comprehensive reforms to Irish corporate structures and processes to prevent and detect their misuse by bad actors.
- Improved corporate transparency. Expanding access to beneficial ownership registers and making the submission and verification of corporate data more rigorous.
- Properly resourced enforcement. Bolstering the resources and mandates of enforcement bodies to enable the investigation of complex cases of international money laundering.
- Strategic policy shift. Prioritising national efforts to better understand and address transnational money laundering risks, as recommended by the IMF in 2022.
A Catalyst for Change
‘We hope that the Weak Links report will make policymakers understand how easy it is to launder the proceeds of transnational organised crime and corruption via Ireland, and that they will implement the necessary reforms. Given the enormous size of Ireland’s financial services sector, we have an equally important role to play in global efforts to dismantle criminal financial networks, while protecting the integrity of our financial system, added Dr Chance.
Ends
The report is available here.
For general information, please contact TI Ireland on admin@transparency.ie or call 01 554 3938.
About TI Ireland:
TI Ireland is the Irish chapter of the global Transparency International movement against corruption. TI Ireland is an independent, non-profit and non-partisan organisation. Its vision is of an Ireland that is open and fair, and where entrusted power is used for the common good. Its mission is to empower people with the support they need to promote integrity in public life and stop corruption in all its forms.