US embassy cable - 04DUBLIN1823

UNCLAS SECTION 01 OF 03 DUBLIN 001823 
 
SIPDIS 
 
FOR INL 
EUR/UBI 
JUSTICE FOR OIA AND AFMLS, AND TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: KCRM, PTER, KSEP, SNAR, KTFN, EFIN 
SUBJECT: IRELAND: 2004-2005 INTERNATIONAL NARCOTICS CONTROL 
STRATEGY REPORT (INSCR) PART II 
 
REF: STATE 254401 
 
1.  Please see below outline for post's submission as chapter 
for 2004-2005 International Narcotics Control Strategy Report 
(INSCR) Part II. 
 
The primary sources of funds laundered in Ireland are 
narcotics trafficking, fraud and tax offenses. Money 
laundering mostly occurs in financial institutions and 
bureaux de change. Additionally, investigations in Ireland 
indicate that some business professionals have specialized in 
the creation of legal entities, such as shell corporations, 
as a means of laundering money. Trusts are also established 
as a means of transferring funds from the country of origin 
to offshore locations. The use of shell corporations and 
trusts makes it more difficult to establish the true 
beneficiary of the funds, which makes it difficult to follow 
the money trail and establish a link between the funds and 
the criminal. 
 
The use of solicitors, accountants, and company formation 
agencies in Ireland to create &shell companies8 has been 
cited in a number of suspicious transaction reports (STRs), 
and in requests for assistance from Financial Action Task 
Force (FATF) members. Investigations have disclosed that 
these companies are used to provide a series of transactions 
connected to money laundering, fraudulent activity, and tax 
offenses. The difficulties in establishing the &beneficial 
owner8 have been complicated by the fact that the directors 
are usually nominees and are often principals of a 
solicitors, firm or a company formation agency. 
 
Money laundering relating to narcotics trafficking and other 
offenses was criminalized in 1994. Financial institutions 
(banks, building societies, the Post Office, stockbrokers, 
credit unions, bureaux de change, life insurance companies, 
and insurance brokers) are required to report suspicious 
transactions and currency transactions exceeding 
approximately $15,000. The financial institutions are also 
required to implement customer identification procedures, and 
retain records of financial transactions In 2003, Ireland 
amended its Anti-Money Laundering law to extend the 
requirements of customer identification and suspicious 
transaction reporting to lawyers, accountants, auditors, real 
estate agents, auctioneers, and dealers in high-value goods, 
thus aligning its laws with the European Union's Second Money 
Laundering Directive of 2001. The Irish Financial Services 
Regulatory Authority (IFSRA) supervises the financial 
institutions for compliance with money laundering procedures. 
In addition to STRs, there are customs reporting requirements 
for anyone transporting more than euro 12,700. 
 
Ireland's international banking and financial services sector 
is concentrated in Dublin's International Financial Services 
Centre (IFSC). In 2004, a 430 international financial 
institutions and companies operated in the IFSC. Services 
offered include banking, fiscal management, re-insurance, 
fund administration, and foreign exchange dealing. The IFSRA 
regulates the IFSC companies that conduct banking, insurance, 
and fund transactions. Tax privileges for IFSC companies have 
been phased out over recent years and will totally expire in 
2005. 
 
In 1999, the Corporate Law was amended to address problems 
arising from the abuse of Irish-registered nonresident 
companies (companies which are incorporated in Ireland, but 
do not carry out any activity in the country). The 
legislation requires that every company applying for 
registration must demonstrate that it intends to carry on an 
activity in the country. Companies must maintain at all times 
an Irish resident director or post a bond as a surety for 
failure to comply with the appropriate company law. In 
addition, the number of directorships that any one person can 
hold, subject to certain exemptions, is limited to 25. This 
is aimed at curbing the use of nominee directors as a means 
of disguising beneficial ownership or control. 
 
In August 2001, the Government of Ireland (GOI) enacted the 
Company Law Enforcement Act 2001 (Company Act), to deal with 
problems associated with shell companies. The legislation 
establishes the Office of the Director of Corporate 
Enforcement (ODCE), whose responsibility it is to investigate 
and enforce the Company Act. The ODCE also has a general 
supervisory role in respect of liquidators and receivers. 
Under the law, the beneficial directors of a company have to 
be named. The Company Act also creates a mandatory reporting 
obligation for auditors to report suspicions of breaches of 
company law to the ODCE. In 2004, the ODCE had 20 
prosecutions resulting in fines of varying amounts. 
 
The Bureau of Fraud Investigation (BFI), Ireland's financial 
intelligence unit (FIU), analyzes financial disclosures. In 
2003, a new Irish legal requirement went into effect, 
mandating obligated reporting institutions to file STRs with 
the Revenue (Tax) Department in addition to the BFI. Ireland 
estimates that up to 95 percent of STRs may involve tax 
violations. The Value Added Tax (VAT) fraud scams are the 
most prolific and have increased significantly in recent 
years.  In 2004, the Criminal Assets Bureau took action in a 
number of such cases, the details of which are not yet 
available. 
 
The number of Suspicious Transactions Received (STRs) by the 
Irish national police decreased from 4,398 in 2002 to 4,254 
in 2003, a number of which are currently under investigation. 
 Convictions for money laundering offenses under the Criminal 
Justice Act totaled seven in 1999, ten in 2000, four in 2001, 
and two in 2002.  In 2003, there were three prosecutions 
resulting in two convictions, currently awaiting sentencing. 
A conviction on charges of money laundering carries a maximum 
penalty of 14 years, imprisonment and an unlimited fine. 
 
Under certain circumstances, the High Court can freeze, and 
where appropriate, seize the proceeds of crimes. When 
criminal activity is suspected, the exchange of information 
between police and the Revenue Commissioners is authorized. 
The Criminal Assets Bureau (CAB) was established in 1996 to 
confiscate the proceeds of crime in cases where there is no 
criminal conviction. The CAB includes experts from Police, 
Tax, Customs and Social Security Agencies. Under the Proceeds 
of Crime Act 1996, specified property may be frozen for a 
period of seven years unless the Court is satisfied that all 
or part of the property is not the proceeds of crime.  Since 
1996, the CAB has frozen over euro 50 million of assets, and, 
in 2003, collected euro 10 million in taxes against the 
proceeds of criminal activity.  In 2003, the CAB initiated 
criminal prosecutions against a number of persons for 
breaches of criminal law and proceeded with successful 
investigations/prosecutions for revenue and social welfare 
offenses previously not presented before criminal courts. 
 
In 2002, the GOI introduced the Criminal Justice (Terrorist 
Offences) Bill targeting fund-raisers for both international 
and domestic terrorist organizations. In December 2004, the 
Lower House of Irish Parliament approved this Bill, paving 
the way for Senate approval in early 2005 and later 
ratification of the "UN Convention for the Suppression of the 
Financing of Terrorism,8 which will extend the existing 
powers of the Government to seize property and/or other 
financial assets belonging to groups suspected of involvement 
in terrorism financing. The bill will allow the Irish 
national police to apply to the courts to freeze assets where 
certain evidentiary requirements are met.  To date, Ireland 
has reported to the European Commission the names of seven 
individuals, including one in 2004, who maintained a total of 
nine accounts that were frozen in accordance with the 
provisions of the EU Anti-Terrorist Legislation. The 
aggregate value of the funds frozen was approximately 90,000 
euros. 
 
In 2003, a money laundering investigation concerning a bureau 
de change operation uncovered evidence of the laundering of 
terrorist funds derived from international smuggling. 
Substantial cash payments into the bureau de change were not 
reflected in the principal books, records, and bank account. 
The bureau de change held a large cash reserve that was drawn 
upon when necessary by members of the terrorist organization. 
The bureau de change remitted payments from its legitimate 
bank account to entities in other jurisdictions, on behalf of 
the terrorist organization. 
 
In terms of preventing money laundering, the Central Bank 
began reporting to the Irish police regarding institutions 
under its supervision.  The reports consisted of failure to 
establish identity of customer, failure to retain evidence of 
identification, or failure to adopt measures to prevent and 
detect the commission of a money laundering offense. 
 
The Central Bank participated with an Irish parliament 
sub-committee in drafting Guidance Notes for regulated 
institutions on combating and preventing terrorist financing. 
 These notes will be finalized and issued to institutions 
upon the passing of the pending Criminal Justice (Terrorist 
Offenses) Bill of 2002.  The Bill is expected to pass into 
law in February 2005. 
 
In January of 2001, Ireland and the United States signed a 
Mutual Legal Assistance in Criminal Matters Treaty (MLAT); 
however, it is not yet in force. An extradition treaty 
between Ireland and the United States is in force. Ireland is 
a member of the EU, the Council of Europe and the FATF. The 
FIU is a member of the Egmont Group. Ireland has signed, but 
not yet ratified, the UN International Convention for the 
Suppression of the Financing of Terrorism and the UN 
Convention against Transnational Organized Crime. Ireland is 
a party to the 1988 UN Drug Convention and the Council of 
Europe Convention on Laundering, Search, Seizure, and 
Confiscation of the Proceeds from Crime. 
KENNY