Authorities ‘powerless’ to stop Russian money flowing through funds in Ireland, says official

Irish authorities are powerless to stop the flow of Russian money moving through funds set up in Ireland, as sanctions were “unenforceable” in practice, a high-ranking civil servant has said.

The head of the Department of Finance’s anti-money laundering unit, Brenda McVeigh, has said the legislation behind sanctions placed on Russia following the invasion of Ukraine did not work in reality.

Authorities could be aware of cases where Russian money was moving through funds based in the International Financial Services Centre (IFSC) in Dublin, but “can’t actually do anything about it”, the official told a panel talk this week.

“Our legislation doesn’t work but we are all supposed to keep very quiet about that,” the finance official said.

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The Garda’s financial intelligence unit could receive information about special purpose vehicles, known as Section 110s, suspected of breaching sanctions, but were limited in their response, she said.

“You can sit there and tell us [about] some Section 110 in the funds industry or down in the IFSC, and say ‘I know there is Russian money moving through that particular trust’, they can knock on the door, but they can’t actually do anything about it,” she said.

The financial entity in question could “just slam the door in your face and say ‘I’m away’”, she said.

Ireland and the rest of the European Union introduced a wide range of sanctions on Russia following the invasion of Ukraine last year, which included measures to freeze assets of sanctioned companies and individuals and stop the movement of Russian money.

However, Ms McVeigh said the legislation in Ireland was “not actually effective”.

The finance official said as a result sanctions did not amount to “a hill of beans” in practice.

“I can say actually they don’t work and the way that we do them doesn’t work ... The legislation that we have doesn’t really work, it’s actually unenforceable,” she said.

There were internal concerns, which she said were shared by the Attorney General, “about the fact our legislation doesn’t work”.

The department official said a “very fundamental review” was needed of the sanctions regime, while also questioning whether Ireland had “the resources” to properly enforce the measures.

The sanctions placed on Russia had put a huge focus on the policy area, she said. “I’m hoping it’s going to come now to a point of actually doing something effective,” she added.

Department officials had been discussing privately the possibility of sanctions being introduced against actors in the Israel-Hamas conflict in the Middle East in recent weeks, as part of a “pan-European response”, she said.

Ms McVeigh was speaking at a panel talk on Thursday evening to launch the Wild Atlantic Law festival, which is to take place in Co Clare in May 2024.

The department did not respond to queries from The Irish Times about Ms McVeigh’s comments.

Jim Stewart, adjunct professor of finance at Trinity College Dublin, who has studied the movement of Russian money through the IFSC, said there were “many ways” to avoid sanctions. “There are a lot of funds being hid in Ireland, but they’re very difficult to track,” he said.

Regulators would need to be “more proactive” and co-operate to track the flow of money across several jurisdictions for sanctions to be effective, he said.