Chesterton Finance Company, the finance business at the centre of the Garda investigation into IRA money laundering, is completely unregulated.
The Irish Financial Services Regulatory Authority said yesterday it had no power to regulate money-lending businesses like Ballincollig-based Chesterton, which do not require authorisation or licencing by the organisation.
The spokesman said that the Consumer Credit Act specifically exempted "mortgage lenders" such as Chesterton which advance money from their own resources secured on assets such as property.
He added that IFSRA did not have an estimate of the number of companies that fell into this category, or the amount of money that they lent. The reason for the exemption is not clear, but the 1999 advisory group that gave rise to IFSRA recommended that such businesses be regulated.
The group was chaired by Mr Michael McDowell SC, the current Minister for Justice.
Chesterton is one of a web of companies run by Mr Ted Cunningham which were involved in secured lending and real-estate investment. Mr Cunningham is one of a number of individuals arrested by the Garda last week in connection with the investigation into IRA money laundering. He was released without charge after 48 hours.
Chesterton was involved in lending money secured on fixed assets. It offered its backers returns that were at a significant premium to commercial bank deposit rates. In 2003 it was offering a return of 10 per cent a year compared to deposits rates of 3 per cent or less that were on offer from the bank.
Details of Chesterton's modus operandi are contained in correspondence between accountants PricewaterhouseCoopers and a prospective investor in the business.
Chesterton was a client of PwC according to the correspondence, which was signed by a partner in PwC, Mr William Roche, who retired around a year ago.
In one of several letters written in support of Chesterton Mr Roche points out that the "rate of 10 per cent . . . is, in the present economic climate, a very good rate." Mr Roche declined to comment yesterday.
A spokesman for PwC said: "Given the ongoing investigation into Chesterton Finance, the legal advice we have is that it is inappropriate to comment."
The directors of Chesterton include Mr Phil Flynn, the former trade union leader turned business consultant. Mr Flynn resigned from a number of private and public sector posts at the weekend after his involvement in Chesterton became public. He has denied any involvement in money laundering and claimed that Chesterton is "clean".
Chesterton was incorporated in November 1999 and is one of a range of companies owned by Mr Cunningham (56) of Farran, Co Cork, and Ms Irene Johnstone (53), Farnanes, Co Cork, with each director having an equal shareholding.
The latest accounts filed by Chesterton state that the company made a profit of €32,421 in the year to end February 2004. Loans outstanding to clients were €1.5 million. During the year the directors were paid €119,401, according to the accounts.
Notes to the accounts state the company loaned €380,000 to Highbury Holdings Ltd, a company with a registered office at Rahan, Tullamore, Co Offaly. Mr Cunningham and Ms Johnstone joined the board of Highbury in September 2003.
In an annual return, directors are asked to list the other companies of which they are directors. In the latest return for Chesterton, Mr Cunningham and Ms Johnstone state they are also directors of: Chesterton Mortgage Co Ltd; Insurance Concepts Ltd; Tullybeg Retirement Village Ltd; Beechlawn Golf Course & Driving Range Ltd; Highbury Holdings Ltd; Midland Projects Ltd; and Firmount Developments Ltd.
Mr Cunningham is also a director of Wolfe Tone Holdings Ltd and Cave Hill Holdings.
Six of the companies of which Mr Cunningham and Ms Johnstone are directors were established in the period since early 2004.
The accounts for Highbury Holdings indicate that Chesterton has a charge over lands and premises belonging to Highbury.
Most of the companies of which Mr Cunningham and Ms Johnstone are directors have little by way of financial information or have accounts that indicate low turnovers. Firmount Developments gives its business object as the development and selling of real estate.
It was established in February 2004. The directors are Mr Cunningham and Ms Johnstone, as well as Ms Cathy Armstrong (44), Farran, Co Cork , and Mr Jeffrey Johnstone (56), Farnanes, Co Cork.
Wolfe Tone Holdings, which gives its business object as being motion pictures and videos, was established in March 2004. The directors are Mr Cunningham and Mr Dave O'Sullivan (60), Passage West, Co Cork.
Mr Cunningham and Mr O'Sullivan are also the directors of Cave Hill Holdings, which was again incorporated in March 2004 and gives its business object as motion pictures and videos.